Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — NATIONAL FINANCE

Value Added Tax

Mr. Terry Walker: asked the Chancellor of the Exchequer if he will consider making his VAT regulations retrospective to people building their own homes, where the goods were purchased before his November announcement but their homes were not completed.

The Financial Secretary to the Treasury (Dr. John Gilbert): We considered carefully and sympathetically the operative date of the relief we are introducing under Clause 3 of the autumn Finance Bill, but we concluded that the provision should not have retrospective effect.

Mr. Walker: Does my hon. Friend agree that do-it-yourself builders need great encouragement from the Government as they are doing a first-class job? Will he make an assessment of the likely cost of such a concession to those affected by my Question? They are under considerable financial pressure, and any help that we can give them will be greatly welcomed.

Dr. Gilbert: I thoroughly endorse the sentiments expressed by my hon. Friend. The reason why the relief was not given retrospectively had nothing to do with cost. It was merely that if we had done it in that way it would have been extremely difficult to preserve equity between individuals who started building their houses as long ago as April 1973. It would have been an impossible task for them to produce invoices going back that far.

Dr. John A. Cunningham: Will my hon. Friend say how many people in total have been caught in this VAT trap while building their own homes? Is he aware that this is particularly important in rural areas, where a greater percentage of people become involved in this kind of activity? Cannot the Government be generous in these circumstances and give the people concerned a refund of the tax they pay?

Dr. Gilbert: I am afraid that I cannot give my hon. Friend the statistic for which he asks. I take his point that people in rural areas are particularly involved in extremely worthwhile activity of this sort. The concession is to some extent retrospective in that it is not confined to people who started building their houses after the date on which my right hon. Friend announced the concession. Anyone who is receiving supplies that would otherwise have been taxable after that date, even in respect of a house that had already been started, will receive the relief.

Mr. David Howell: While I recognise the difficulties of conceding to the pressures that the Minister's hon. Friends are putting on him, is not the hon. Gentleman aware that the Government have no one to blame but themselves if they are put under pressure to introduce further retrospection bearing in mind the extensive retrospective effect of a great many of their measures in the current Finance Bill?

Dr. Gilbert: It is a little cool for that sort of comment to come from a member of the Conservative Party which suggests that we should be giving greater relief in this respect. Do-it-yourself builders are paying value added tax only because it was imposed by the previous Conservative Government. Relief is now being extended by my right hon. Friend.

Mr. Michael McNair-Wilson: asked the Chancellor of the Exchequer what consideration has been given to relieving the bloodstock industry of value added tax.

Dr. Gilbert: At a meeting which I had with the Bloodstock VAT Committee last April, I explained the difficulties involved in contemplating a concession falling in the area of discretionary


expenditure, but said that I would consider any "hard" evidence which the committee might put forward in support of its case for the zero rating of blood-stock. Although the further evidence produced did not advance the committee's case, I understand that the committee has been reconstituted to represent wider interests and that further representations are going to be made.

Mr. McNair-Wilson: While I am grateful for what the Minister has said and for the sympathy with which he is viewing this subject, may I press upon him the representations that have been made to me by trainers and owners in the Lambourn area of my constituency to the effect that the present rate of VAT is doing grave damage to the bloodstock industry? The industry is a vitally important foreign exchange earner. Even if the Minister cannot agree to zero rating, is he aware that at least some relief would make a great deal of difference?

Dr. Gilbert: I am obliged to the hon. Gentleman for the moderate way in which he has put his representations. I am sure he will acknowledge that the rate of value added tax bearing on the blood-stock industry is lower now than it was before. The officials of Customs and Excise have been looking into the technical matters which might give some marginal relief. I hope that it might be possible to make some progress in that direction. I cannot give the hon. Gentleman any further encouragement.

Mr. Wiggin: Is the Minister aware that a far greater threat to the bloodstock and racing industry lies in the capital transfer tax in the present Finance Bill? Has he given thought to a future situation in which all racehorses will be owned by the State, or does he have any other plans for ensuring the continuation of the racing industry?

Dr. Gilbert: As the hon. Gentleman well knows, the measures involving the capital transfer tax will be discussed in great detail in Committee on the Finance Bill. Possibly that discussion is better left to those proceedings.

Mr. Monro: The Minister knows that I wrote to him about this matter last month. Does he accept that the

interpretation of VAT by the Treasury is much more rigid than that by the tax authorities in France, which consequently benefits our racing and breeding competitors in France? Does he realise that this greatly affects an industry already beset with financial problems? Will he go a little further than he has gone today—although I am glad that he will consider the matter again—bearing in mind that the industry in total is contributing approximately £650 million to the Treasury?

Dr. Gilbert: I am well aware of the considerations that the hon. Gentleman puts forward. He will also recognise that there are many wider considerations that have to be taken into account. There are many other powerfully-argued cases for relief. This is essentially an element of discretionary expenditure. We are receiving powerful representations from all forms of sport, from the living theatre, from charities and from other organisations. It is a question of establishing priorities for relief.

Motor Industry

Mr. Madel: asked the Chancellor of the Exchequer what plans he has for altering the present rates of taxation and hire-purchase rates in relation to the motor industry.

Dr. Gilbert: Questions about taxation are matters for my right hon. Friend's overall Budget strategy, and the hon. Member will not expect me to comment at this time.

Mr. Madel: As a number of smaller cars are about to be launched by British manufacturers at a time when there is an alarming increase in short-time working, may I ask the hon. Gentleman to consider acting now to help the industry in what are difficult home and world market conditions?

Dr. Gilbert: My right hon. Friend is fully aware of the circumstances to which the hon. Gentleman refers. I am sure that his remarks will have been noted.

Mr. Sedgemore: Is it not the case that unless and until the Government reflate the economy, short-time working and unemployment will increase in the motor car industry and in the country at large?


Can my hon. Friend confirm or deny suggestions that the Treasury now accepts that unemployment in excess of I million this year is inevitable?

Dr. Gilbert: I certainly do not accept the suggestion at the end of my hon. Friend's supplementary question. Not all the difficulties of the car industry are due to macro-economic factors. My right hon. Friend is aware of my hon. Friend's comments.

Mr. Graham: When my hon. Friend is considering the aid that can be given to the motor industry, may I ask him to spare a thought for the retail distributive trade? Is he aware that the problem of short-time working in many of the industries producing consumer durable goods in Edmonton and Enfield is causing serious hardship? Will he give serious consideration to relaxing hire-purchase controls, particularly as they relate to deposits and the length of payment, because this would give a boost to employment and retail sales?

Dr. Gilbert: My right hon. Friend will be considering very sympathetically all the points put by my hon. Friend.

Company Taxation

Mr. Dalyell: asked the Chancellor of the Exchequer what assessment he has made of the difficulty and Civil Service manpower involved in separating the raising and spending of company taxation in England from company taxation in Scotland.

Dr. Gilbert: The problems, from the point of view of both the Inland Revenue and companies, of trying to allocate company profits to different parts of the United Kingdom are so formidable that any attempt to do so would be quite impracticable.

Mr. Dalyell: Does not that answer illustrate the impracticability of giving revenue-raising powers to a Scottish Chancellor of the Exchequer responsible to a Scottish Assembly?

Dr. Gilbert: I have a great deal of sympathy with my hon. Friend's point. I am sure he will be aware that the Kilbrandon Commission specifically said that corporation tax was not at all suitable for devolution to regional administrations.

Mr. Henderson: Will the hon. Gentleman recognise that the problem raised by the hon. Member for West Lothian (Mr. Dalyell) is a symptom of the difficulties of the Labour Party in coming to any agreement on devolution? Will he accept that sooner or later we shall have to have separate taxation because there will be an independent State of Scotland?

Dr. Gilbert: It is not for me to comment on the likelihood of there being an independent State of Scotland. If there were to be one, I suspect that my hon. Friend the Member for West Lothian (Mr. Dalyell) would be a far more likely candidate than the hon. Gentleman for a Scottish Chancellor of the Exchequer.

National Savings Stamp

Mr. McCrindle: asked the Chancellor of the Exchequer what representations he has now received regarding his intention to phase out the national savings stamp.

Mr. Michael Marshall: asked the Chancellor of the Exchequer what recent representations he has received on the Government's decision to discontinue the national savings stamp.

The Paymaster-General (Mr. Edmund Dell): Since I announced the Government's decision to discontinue the national savings stamp we have received 256 letters, and I have received a deputation from the leaders of the movement for England and Wales.

Mr. McCrindle: Is the right hon. Gentleman aware that at the least we might have hoped that a decision would be forthcoming to reverse the previously announced intention to phase out the savings stamp? Has the right hon. Gentleman noticed the large number of hon. Members from both sides of the House who have signed Early-day Motion No. 3 which has this aim in mind? In view of the announcement yesterday that television licence fees are to be increased and of the fact that old-age pensioners have used the savings stamp as a way of saving up for the licence fee, may I ask the right hon. Gentleman to think about this again?

Mr. Dell: The hon. Gentleman's supplementary question shows that he cannot have studied in full what the Government are proposing. We are proposing


that before the stamp is phased out there should be a television licence fee scheme for the very purpose he has mentioned. As for reversing this decision, I do not think that would be sensible, because what has happened since the decision was announced is that the savings movement in England, Wales and Scotland has turned to the task of redirecting its efforts in what I think will be a much better route.

Mr. Marshall: Will the right hon. Gentleman accept that the statistics he has given represent only part of the feeling on this matter? Is he aware that many of us are concerned about the way in which people who have used this useful form of savings are now to be deprived of it? Is he further aware that many of us feel that his answer does not accurately reflect the facts but rather reflects the switching which has been necessary because of the decision he has taken? Will he reconsider this matter and, if necessary, persuade his right hon. Friend the Chancellor to accept the will of Parliament if this is brought before the House—as the right hon. Gentleman so signally failed to do last night?

Mr. Dell: The stamp is used as a short-term budgetary device. It is not used for saving in the way that was originally intended. A small proportion of the stamps is used for that purpose. As a short-term budgetary device there are alternatives which are more secure, which do not involve the same dangers of loss as stamps and on which people can receive interest. I can assure the hon. Member that although there has been some feeling about this, which I can understand and with which I have sympathy, if the Government were to reverse this decision it would deflect the savings movement again from what are certainly more profitable directions which will encourage savings.

Woodlands (Taxation)

Mr. Marten: asked the Chancellor of the Exchequer what representations he has had from forestry interests about the likely effects of his proposals for the tax treatment for woodlands on the capital transfer tax.

Dr. Gilbert: My right hon. Friend has had representations on this matter from a number of sources. Possible effects of

the tax on woodlands will depend on the final form of the provisions in the Finance Bill.

Mr. Marten: In the light of those representations, does the Treasury recognise the genuine concern about the effect of this tax? Will the hon. Gentleman bear in mind in Committee the damage which will be caused by premature felling to pay the tax? Is he aware that that will lead in turn to increased timber imports and to unemployment? If he can do nothing else, can he make a distinction between softwood and hardwood when he considers taxation rates?

Dr. Gilbert: Only a week ago my right hon. Friend said that he had received many representations on this point and that he intended to take them very seriously. We hope to bring forward proposals later in Committee.

Mr. Tom Ellis: Is my hon. Friend aware that many Labour Members believe that there is an element of over-kill in the proposal, which could have serious repercussions on many aspects of our national life?

Dr. Gilbert: I note what my hon. Friend has said. Representations have been made to my right hon. Friend from representatives of all six parties in the House.

Mr. Hall-Davis: Will the hon. Gentleman pay particular regard to representations from national park areas such as the Lake District National Park, where the effect of premature felling and the abandonment of woodland would gravely damage the landscape and the environment which is so much enjoyed by so many?

Dr. Gilbert: I am grateful to the hon. Member for raising that point. I certainly assure him that amenity considerations weigh strongly with my right hon. Friend.

Mr. Canavan: If there is any danger of forestry workers losing their jobs as a result of these taxation measures, will my hon. Friend consult his colleagues about the possibility of the Forestry Commission, for example, taking over the management, or even the ownership, of privately-owned forestry to conserve employment and the environment?

Dr. Gilbert: That question goes rather wider than my responsibility. I will see that my hon. Friend's comments are conveyed to my right hon. Friends.

Inflation

Mr. Rost: asked the Chancellor of the Exchequer if he is satisfied that measures introduced so far will achieve his stated objective of a 10 per cent. annual rate of inflation by the end of this year.

Mr. Skinner: asked the Chancellor of the Exchequer if he is satisfied with the progress of his policies to combat inflation.

The Chancellor of the Exchequer (Mr. Denis Healey): The success of the Government's counter-inflation policy depends above all on the effective working of the social contract. If we can achieve stricter adherence to the TUC guidelines over the coming months, we can get the rate of inflation down by the end of the year. I have never stated an objective of 10 per cent.

Mr. Rost: As the rate of inflation—according to the Chancellor's own figures—has trebled since September from 8·4 per cent. to 25·2 per cent., will he explain how the allocation of further vast sums for indiscriminate food subsidies will help him to achieve his objective?

Mr. Healey: Yes, Sir. The allocation of sums to food subsidies will bring down the retail price index significantly, not only acting directly on the main indicator of inflation but reducing the rate at which settlements need to be reached.

Mr. Skinner: If my right hon. Friend is to combat inflation more quickly than some people expect, does he understand that he will have to stop the bleeding that has occurred as a result of our entry into the Common Market? Does he understand these figures: a £2,000 million trading deficit in the course of two years, a 20 per cent. devaluation of the pound and a 33 per cent. increase in prices coupled with 750,000 men on the dole—and the number is rising? Does he realise that all those things are the result of our entry into the Common Market and that he would do well to advocate in the Cabinet that we should get out and keep out?

Mr. Healey: I am afraid that I do not understand those things. I recognise that many unpleasant things have happened over the last three years, but I do not think they can all be attributed to our entry into the Common Market.

Mr. Norman Lamont: Will the Chancellor amplify his statement, which I think has been repeated by the Prime Minister, that 75 per cent. of wage settlements have been within the terms of the social contract? Does that 75 per cent. include the allowed exceptions and in what proportion are they? Does that statement mean that 75 per cent. of settlements have been within the rise in the cost of living at the time of the settlement? What does it mean?

Mr. Healey: The hon. Gentleman has perhaps had an opportunity by now to read the various documents in which the guidelines for wage bargaining, which are part of the social contract, are contained. Seventy-five per cent. of the working people covered by settlements, not 75 per cent. of the settlements, are within those guidelines. Twenty-five per cent. are outside those guidelines, and I have said that that proportion is far too high.

Mr. Tomlinson: Does my right hon. Friend agree that if Opposition Members want to do something to combat inflation they would have been well advised last night not to seek to increase the public borrowing requirement as such an increase is damaging to our campaign against inflation? Will my right hon. Friend give urgent consideration to ensuring that there will be increases in taxation, met by those with the greatest capacity to pay, to cover the cost of the decision which was taken last night?

Mr. Healey: Unless Opposition Members, in the light of their action last night, have decided to withdraw them, there are some Questions on the Order Paper about the public sector borrowing requirement which I shall be pleased to deal with presently. In reply to the last part of my hon. Friend's supplementary question, I am considering some very interesting proposals for raising the money which Opposition Members have added to the public sector borrowing requirement, and I shall announce them at the appropriate time.

Mr. Robert Carr: To revert to the Chancellor's original answer, is it not a fact that in a public speech in September he told the public that he expected inflation to be reduced to about 10 per cent. by the end of this year if the social contract was adhered to? What has happened since September to change his view?

Mr. Healey: First, I did not say that in a public speech. I will send the right hon. Gentleman a copy of my speech if he wishes. I made clear that if the undertakings given by both sides in the social contract were maintained, if world prices did not rise and if there was international co-operation in the continued growth of trade and output throughout the world, we could get the rate of inflation in Britain down near to 10 per cent. by the end of 1975. I made clear in my speech in the House on 18th December that some of those conditions had not been fulfilled. In particular, the increase in world prices envisaged in December was substantially higher than any of us expected in the middle of last year. Secondly, I regret to say that the world is now moving into a recession in which the level of trade and output will not be maintained to the extent I hoped it would be six months ago.

Mr. Stanley: asked the Chancellor of the Exchequer what has been the rate of inflation over the past three months expressed on an annual basis.

Mr. Healey: I would refer the hon. Member to the answer my right hon. Friend the Paymaster-General gave on 21st January to the hon. Member for Derbyshire. South-East (Mr. Rost).—[Vol. 884, c. 318–19.]

Mr. Stanley: As the comparable figure in October was 8·4 per cent. and there has therefore been a dramatic increase in the rate of historic inflation, may I ask whether the Chancellor agrees that if the present rate of inflation continues there will be a remorseless and inevitable increase in unemployment? Does he also agree that there is an inescapable obligation on him to contain the rate of inflation, particularly wage inflation, to protect jobs?

Mr. Healey: The hon. Gentleman may be surprised that my answer is "Yes,

Sir" to all that he has just asked. There is no question that the rate of inflation is too high and needs to come down. One important component in bringing it down, as I said earlier, is to have a less flexible interpretation of the guidelines and a stricter application of them in making settlements. However, I must remind the hon. Gentleman that this imposes responsibilities not only on trade unions but on employers. Some of the grossest breaches in the guidelines recently have been by bodies like the BBC and the clearing banks, which are always the first to criticise the Government for failing to ensure that the social contract is maintained.

Mr. Atkinson: Will my right hon. Friend clear up this ambiguity about his interpretation of the contract? He goes on about the guidelines and says that wage settlements must do no more than equate with the rise in the price index, but will he clearly state whether he is talking of gross or take-home pay?

Mr. Healey: Yes, Sir. First, I believe, as does the TUC General Council, that the social wage must be taken into account as well as negotiated wages. Therefore, it is settlements in relation to the past movement of the RPI. I strongly endorse the clarification by the General Secretary of the TUC last week that unions should relate the settlements and the claims they make to the past movement of the RPI, not to what they imagine may happen in future.

Mr. Robert Carr: Reverting to the original Question, may I ask the Chancellor to confirm that the annual rate of inflation over the last three months, on the same basis as he told the country it was 8·4 per cent. in September, is now 23 per cent. and to explain why that change has occurred?

Mr. Healey: The main reason for this change is that in the last three months the index has reflected 11 threshold payments which had to be made under legislation introduced by the Conservative Government. Groups of workers who had been held back unfairly under statutory control—for example, nurses and postmen—had to be allowed to catch up. I am not aware that the right hon. Gentleman disagreed with that course. But now that thresholds are out of the way and the catching-up process has


taken place, it is very important that we achieve a lower rate of settlement and a much smaller rate of exceptions to the guidelines than in the last few months.

Mr. Pardoe: Does the right hon. Gentleman accept that in his first five months as Chancellor he reduced the three-monthly annual rate of inflation to 8½ per cent.? How much of that was his own work? Does he accept that in the following four months he increased it to 23 per cent.? How much of that was his own work? Looking to the future, does he accept the estimate of the research department of my union, ASTMS, that the rate of inflation over the next 12 months will be in excess of 23 per cent.?

Mr. Healey: Like all hon. Members, I respect the hon. Gentleman's industrial and union experience, but I do not agree with the estimate he has quoted. He asked how much of what happened last year and this year was the effect of Government policy. There is no question that there will be some increase in the RPI this year resulting from Government decisions which, I think, are supported by Opposition Members: first, the decision to relax price controls to prevent mass bankruptcies and unemployment and, secondly, the decision to increase petrol prices and to have realistic pricing for the nationalised industries to reduce the consumption of energy. I hope that the hon. Gentleman, who on most occasions is a fairly objective fellow, will endorse both those elements in our current policy.

Mr. Stanley: On a point of order, Mr. Speaker. In view of the unsatisfactory nature of the Chancellor's reply, I wish to give notice that I shall raise the matter on the Adjournment at the earliest opportunity.

Indexation

Mr. Lawson: asked the Chancellor of the Exchequer what plans he has to index the tax system, with special reference to the rates of income tax; and whether he will make a statement.

Mr. Dell: The effects of inflation on the tax system are kept under continuing review by the Treasury and Revenue Departments.

Mr. Lawson: I am glad to hear that, but is it not the case that the present rate of inflation, coupled with a non-indexed taxation system, has a profound and capricious effect both on the pattern of taxation and on the real incidence of taxation, including in particular an increase in the real burden of income tax without the sanction of Parliament? Now that the Treasury has at last yielded the principle of indexation by indexing savings bonds—which I welcome—is it not high time to extend indexation to taxation? Will the Minister appoint a full committee of inquiry into this important and urgent subject?

Mr. Dell: What the hon. Gentleman said at the beginning of his supplementary question is true. Inflation affects the real burden of taxation under our present system. On the other hand we have frequent opportunities in at least annual Budgets to review the level of allowances, and my right hon. Friend has indicated that he will be reviewing the level of personal allowances in his next Budget. I see no point at the moment in a committee of inquiry. As the hon. Gentleman knows, the Sandilands Committee is looking at one aspect of the problem, and we shall study what the committee says.

Government Borrowing

Mr. Norman Lamont: asked the Chancellor of the Exchequer what is his latest estimate of the Government's borrowing requirement for the year 1974–75; and what steps he is taking designed to reduce it.

Mr. Gow: asked the Chancellor of the Exchequer whether his estimate of the public sector borrowing requirement for the current financial year has increased; and, if so, by what amount since his Budget Statement on 12th November 1974.

Mr. Biffen: asked the Chancellor of the Exchequer if, and by what means, he proposes to reduce the public sector deficit of £6,300 million.

Mr. Healey: It is not customary to give forecasts of the public sector borrowing except at Budget time.

Mr. Lamont: Regardless of whether it is customary to give such estimates, is the Chancellor satisfied that he knows


what the increase in the borrowing requirement might be? Does he recall that during the debates on the Finance Bill in July, when we were arguing about public expenditure, he maintained that the increase in the borrowing requirement was only a few hundred million pounds and that four months later it was revealed to be more than £2,000 million? Did he not know at the time, or was it not politic to tell the House?

Mr. Healey: I am staggered at the effrontery of the hon. Gentleman and his hon. Friends. The hon. Gentleman asked me to predict the borrowing requirement this year. Yesterday he and his right hon. and hon. Friends increased the borrowing requirement by £240 million. They are seeking in Committee to reduce the Government's revenue by reducing the rates of taxation and thereby again to increase the borrowing requirement. There has been a series of Questions on the Floor of the House this afternoon seeking to reduce the revenue from taxation. I cannot predict how far the irresponsibility of the Opposition will go.

Mr. Cant: May I ask my right hon. Friend, purely academically and without wishing to bring politics into it, whether he agrees that, as domestic credit expansion is increasing at twice the rate of M3, the public borrowing requirement—as well as the increase in wages—is having an inflationary effect?

Mr. Healey: No, Sir, I do not, because the public sector borrowing requirement adds to the money stock only to the extent that it is advanced in sterling through the banking system, and all the indicators show that the monetary pressures adding to inflation are not increasing. Substantial increases in budget deficits are now occurring all over the world as the result of recent oil price increases and the need to counter recession. The United States Secretary of the Treasury announced recently that the central Government deficit alone in the United States will amount to $85 billion over the next 17 months—that is, £35 billion. The West German Government recently announced that they expect their central Government financial deficit this year to amount to 50,000 million deutschemarks—that is, £10 million. Opposition Members, who are doing everything they can to seek to

increase the Government's borrowing requirement, would have done well to take the oportunity to keep their mouths closed on this question this afternoon.

Mr. Gow: Has the Chancellor's attention been drawn to the views of his right hon. Friend the Secretary of State for Industry about the bad effects from the point of view of national sovereignty of British membership of the EEC? Does not the Chancellor agree that Oriental borrowing on a massive scale from the Shahanshah of Iran and the King of Saudi Arabia—who are not happy bedfellows with the right hon. Gentleman—puts in hock our own foreign policy? Will he address himself to this matter?

Mr. Healey: I do not think that the faintly ridiculous and outdated chauvinism displayed by the hon. Member will commend itself to either side of the House. I would remind him that the borrowing of which he complains was begun by the Conservative Government before we had an oil deficit.

Mr. Biffen: Will the right hon. Gentleman clarify one simple point: is it his objective to reduce the level of the public sector borrowing requirement?

Mr. Healey: Let me say, Mr. Speaker, "You, too, Brutus". [HON. MEMBERS: "Oh."] I am quoting, Mr. Speaker, as you recognise, and not addressing myself directly to you. Of course I should like to see the public sector borrowing requirement less high than it is, but it is even more important to avoid mass unemployment. At the moment we have a choice. That choice is not made any simpler by the fact that the hon. Member and his Conservative colleagues last night, and continuously in Committee at present, are seeking to increase the borrowing requirement by forcing on the Government unwanted increases in the public sector and are seeking to reduce public revenue.

Mr. Tomlinson: Will my right hon. Friend make it abundantly clear, so that there can be no misunderstanding in view of the general concern about the public borrowing requirement, that following the decision taken by the Opposition last night the Government will tackle the consequences of that vote not by cutting public expenditure but by raising taxation in another area to compensate for the decision that was reached?

Mr. Healey: I am grateful to my hon. Friend. I made that very clear, and I am now studying various interesting possibilities to ensure that the cost of the decision forced on the Government last night by the Opposition is borne by those who are capable of bearing the cost.

Mr. Robert Carr: Is the right hon. Gentleman saying that what the House decided last night, with the co-operation of Labour Members, is unwanted expenditure to help old people? Secondly, he made the claim that it will increase the borrowing requirement by £240 millon. In view of the fact that his arithmetic has no precedent and knows no bounds, will the Chancellor publish in the Official Report how that calculation is made?

Mr. Healey: I recognise that many items of public expenditure are desperately wanted by many people, including that which was voted last night, but in the circumstances of the time choices must be made—and choices have been made by the Government. I find it odd coming from the right hon. Gentleman, who has pledged himself to support any attempt made by the Government to keep public expenditure under control, that he should have supported that increase by his vote and also by what he said a moment ago. Secondly, on the question of how the sum is made up, if the right hon. Gentleman had been here during yesterday's debate he would have heard a detailed account of the sums given in the speeches of my hon. Friend the Minister of State, Treasury, and my right hon. Friend the Minister of State, Department of Health and Social Security.

Balance of Payments and Reserves

Mr. Douglas-Mann: asked the Chancellor of the Exchequer what are the latest figures for the reserves, and for the balance of payments deficit over the last 12 months.

Mr. Healey: The level of the official reserves at the end of December was $6,789 million, about £100 million more than at the end of the previous year. The deficit on the current account of the balance of payments in 1974 is estimated to have been £3,730 million.

Mr. Douglas-Mann: Despite the slight recent improvement, does my right hon.
Friend agree that we are tackling a Dunkirk situation by "phoney" war methods? When will the Government accept that we need a major curtailment of private consumption, through taxation or other means, particularly of consumption that is expensive in energy and imports, and that we need full employment maintained by a corresponding increase in public expenditure, particularly in house-building and other social services that are not expensive in that way?

Mr. Healey: I do not agree with the final part of my hon. Friend's supplementary question, and I do not believe that we advance the solution of our problems by the use of tired metaphors from 1940.

Mr. Hordern: Does the right hon. Gentleman appreciate that the converse of the balance of payments deficit is the borrowing requirement? Since the borrowing requirement in the course of six months increased by over £2,500 million, when on the Chancellor's own reckoning the inflation rate was proceeding at 8·4 per cent., will he let the House know the present rate of borrowing requirement? If we are to have a Budget every three months, which is the present going rate, why cannot we have these figures produced much more regularly?

Mr. Healey: If the hon. Gentleman could give me a firm prediction of the extent of the Opposition's responsibility in increasing public expenditure in the course of six months, I might be tempted to follow his advice.

Mr. Ronald Atkins: Is it not time that my right hon. Friend used methods already adopted by other countries, whose deficits are not as bad as ours—namely, to control imports—and also asked the Secretary of State for Defence to reduce the £300 million a year deficit incurred by the British Army of the Rhine in a country which has the largest trade surplus in the world?

Mr. Healey: I do not believe that our economic prospects would be advanced at this time by controlling imports. Secondly, there is a relationship between the public sector borrowing requirement


and the external deficit, but it is noticeable that the Federal Republic of Germany, which in the last year has had the largest external surplus in the world, also expects this year to have the largest public sector deficit in Europe.

Mr. David Howell: Has the right hon. Gentleman any idea of what is happening upstairs in Committee on the Finance Bill? Does he realise that in the Committee the Opposition are pressing that the capital transfer tax should not be brought in, and that by his own admission the capital transfer tax will produce a lower yield than that of the existing estate duty? Therefore, it is the Government and not the Opposition who are pressing measures that will increase the Government deficit in terms of borrowing requirement.

Mr. Healey: I do not know how far the hon. Gentleman follows the speeches made by his right hon. Friend the Member for Finchley (Mrs. Thatcher), who, if I may use the word, is the hon. Gentleman's mistress in the Finance Bill upstairs and who has stated on behalf of the Opposition that they wish to retain estate duty but to introduce a relief in respect of legacies to wives and spouses, which is part of the capital transfer tax. In that case the revenue from estate duty would be substantially lower than that anticipated from the capital transfer tax. I hope the hon. Gentleman will have the honesty to admit that he misled the House unconsciously in pretending that the situation was other than it is.

Taxation (Sex Differentiation)

Mr. Hall-Davis: asked the Chancellor of the Exchequer if he will list those tax provisions which differentiate between men and women or husbands and wives in the taxation of income and capital and in treatment as regards the offsetting for tax of charges and allowances.

Dr. Gilbert: The Taxes Acts do not in general differentiate between men and women. They do in certain respects distinguish between married and single women as a result of the normal income tax rule that the income and gains of a married woman are aggregated with those of her husband. Since the husband is responsible for paying the tax on their combined income he normally receives

the allowances and reliefs appropriate to them. Some of the minor tax allowances—those, for example, for a housekeeper, for a dependent relative or for a daughter's services—also depend to an extent on the sex of the claimant or of the dependant.

Mr. Hall-Davis: May I declare an interest which I have registered with the Table Office. Is the Financial Secretary aware that the Treasury's January Economic Progress Report gives great prominence to the Government's intention to promote a Bill aiming at equality for women? Would it not demonstrate a desirable consistency in Government policy if the Chancellor were to introduce amendments to our tax legislation where, to quote White Paper Command 5724,
The grounds for less favourable treatment are sex or marriage"?

Dr. Gilbert: I have already made clear that the discriminations work both ways in our present tax system. There are some minor anomalies to which I have drawn attention.

Oral Answers to Questions — POPULATION

Dr. Edmund Marshall: asked the Prime Minister whether he is satisfied with the co-ordination between Ministers responsible for carrying out Government responsibilities in respect of population trends.

The Lord President of the Council and Leader of the House of Commons (Mr. Edward Short): I have been asked to reply.
Yes, Sir.

Dr. Marshall: As the birth rate has steadily fallen from 18·8 per thousand in 1964 to 13·9 per thousand in 1973, and in view of the importance of this trend for the work of most Government Departments, may I ask what research is being undertaken by the Government into the factors now influencing the average size of families in this country?

Mr. Short: My hon. Friend is quite correct. The increase in the growth of population has fallen in each of the past eight years, but the population is now almost stable. The Office of Population Censuses and Surveys is stepping up its research effort into population trends,


aimed particularly at increasing knowledge and understanding about the factors influencing child-bearing.

Oral Answers to Questions — ECONOMIC POLICY

Mr. Adley: asked the Prime Minister if he will now assume overall responsibility for running the economy.

Mr. Wyn Roberts: asked the Prime Minister whether he will assume overall responsibility for running the economy.

Mr. George Gardiner: asked the Prime Minister if he now assume overall responsibility for running the economy.

Mr. Hurd: asked the Prime Minister whether he will now assume direct control of the Government's economic policy.

Mr. Edward Short: I have been asked to reply.
As Prime Minister and First Lord of the Treasury, my right hon. Friend already has that responsibility.

Mr. Adley: Did the Lord President hear the Chancellor of the Exchequer's answer just now to the question about unemployment? Will he tell us whether the Chancellor and the Prime Minister are prepared to reject or to agree with the view expressed by the Tribune Group in the Morning Star recently that the Government's present policy towards unemployment is unacceptable?

Mr. Short: My right hon. Friend the Chancellor of the Exchequer accurately expressed the Government's view both here and in his speech in Leeds.

Mr. Spearing: Does my right hon. Friend agree that one of the difficulties in running the economy is the requirement for higher incomes to combat the increasing cost of food? Has he noticed that last Thursday the Minister of State for Agriculture, Fisheries and Food, in reply to my hon. Friend the Member for Fife, Central (Mr. Hamilton), pointed out that the cost of cheese and butter from New Zealand to the consumer was £600 whereas the transfer to the European Economic Community was about £300 in taxes?

Mr. Short: Yes, I noticed that answer. However, the overall effect on food prices

of being in the Market is that they are slightly lower now than they would have been if we had been out of it.

Mr. Roberts: Now that the Price Commission has made it clear that the all-important causal factor of inflation is wage increases, and as the Chancellor of the Exchequer this afternoon said that a less flexible attitude is required towards the guidelines, may I ask why the Government and the TUC do not get together to tighten those guidelines?

Mr. Short: The report stated that there are still some external factors in the pipeline affecting prices. However, we should be clear that from now on the major factor affecting inflation will be pay settlements.

Mr. Atkinson: When the Government refer to pay settlements and state that they must equate with the rise in the price index, are they referring to take-home pay or to gross pay?

Mr. Short: I heard my right hon. Friend the Chancellor of the Exchequer answer that question a few minutes ago.

Mr. George Gardiner: rose—

Mr. Speaker: Order. I must ask whether the hon. Gentleman was in the House when the original answer was given.

Mr. Gardiner: Yes, Mr. Speaker.

Mr. Speaker: Mr. Gardiner.

Mr. Gardiner: Since the right hon. Gentleman says that the Prime Minister has overall responsibility, when will he start exercising it? When will we get some action from him to back up the words that he utters periodically in speeches?

Mr. Short: My right hon. Friend exercises this responsibility all the time. If the hon. Gentleman will take the trouble to look at the Chancellor's Budgets he will see that there is a strategy for tackling inflation, which is beginning to have effect.

Mr. Noble: In view of my right hon. Friend's statement, accepting on behalf of the Prime Minister responsibility for running the economy, and in view of the concern expressed on all sides about inflation, will he impress on his right hon.


Friend the fact that we are shortly to have an injection of inflation through Government action—the defreezing of business rents? Would my right hon. Friend accept that it is not yet too late to prevent this?

Mr. Short: I am sure that the Prime Minister reads everything and will notice my hon. Friend's supplementary question.

Mr. Hurd: Will the right hon. Gentleman now answer the question put by my hon. Friend the Member for Christchurch and Lymington (Mr. Adley)? What is the position of those Ministers who are members of the Tribune Group and, therefore, associated with the recent savage attack on the Chancellor's policies? Will he confirm that the Prime Minister is now presiding over the collapse of collective responsibility, not only on Europe but right across the board?

Mr. Short: Fortunately I have no responsibility for the Tribune Group, but, as I have said, the views expressed by the Prime Minister and the Chancellor accurately reflect the Government's view.

Mr. Kilroy-Silk: Will my right hon. Friend confirm that the attitude of those Ministers who are members of the Tribune Group, as well as all other Ministers and Labour Members, is one of quiet confidence in the Government's economic policies?

Mr. Tugendhat: I do not know whether the right hon. Gentleman can answer this question. If the Prime Minister is in overall charge of the economy, what is his view of the Bank of England's purchase of the unpledged shares in BP, which used to belong to Burmah Oil, at vastly below the market price and at great disadvantage to the shareholders, without consulting the shareholders? Is this fair dealing by the Government?

Mr. Short: This is a very complex matter which no Minister could answer off the cuff. But the hon. Gentleman is asking for the Prime Minister's view, so I suggest that he puts down a Question to him on it.

Mr. English: Has my right hon. Friend any explanation of the discrepancy between the comments of Conservative

Members and the obvious confidence of the Stock Exchange in the Chancellor's policies?

Mr. Heath: As the Lord President has now told the House that the Prime Minister has overall responsibility for running the economy, will he also assure us that in future Questions directly relating to the economy put on the Order Paper to the Prime Minister will be answered by the Prime Minister and not transferred to the Chancellor by his private office? It is an important constitutional matter that the Prime Minister should answer Questions directly relating to the economy.
Second, will the right hon. Gentleman ask the First Lord of the Treasury to ascertain the facts about the earnings rule regulation which was carried last night by the House? He will then find that the cost for 1975–76 is £60 million, of which the Treasury will have to contribute only £9 million, but it will gain £15 million in tax. There will therefore be a net gain for the Exchequer over 1975–76 of £6 million. What, therefore, is this futile and bad-tempered threat from the Chancellor about excess taxation?

Mr. Short: On the second point, the facts about last night are well known. The right hon. Gentleman and his colleagues voted together for something on which they had done nothing in three and a half years of government. Their vote was sheer hypocrisy and irresponsibility. The right hon. Gentleman knows that it makes utter nonsense of trying to find priorities in government if an amendment of that kind, involving a great deal of public expenditure, is passed in that way at a stroke. The right hon. Gentleman should be ashamed of himself for his action. It was sheer, utter humbug and irresponsibility on his part. I am afraid that I have forgotten his first question.

Mr. Heath: If I may help the right hon. Gentleman, the first part of the question was whether the Prime Minister, since he now has responsibility for the overall control of the economy, will answer Questions relating directly to the economy.

Mr. Short: On that, the right hon. Gentleman is the very last one to talk. He transferred Questions right, left and


centre when he was Prime Minister. He knows, of course, that the Prime Minister and every other Minister have the right to transfer Questions.

Oral Answers to Questions — SOCIAL CONTRACT (CHANCELLOR'S SPEECH)

Mr. Lawson: asked the Prime Minister whether the public speech at Leeds on 10th January by the Chancellor of the Exchequer on the economy, unemployment and the social contract represents Government policy.

Mr. Edward Short: I have been asked to reply.
I would refer the hon. Gentleman to the reply which I gave to the hon. Member for Chingford (Mr. Tebbit) on Tuesday 28th January.

Mr. Lawson: If the Lord President has finished abusing Parliament for exercising its free right last night in deciding issues of importance for the nation, will he give a simple "Yes" or "No" answer to the following question? Will he confirm that strict adherence to the terms of the social contract necessarily implies for the majority of people a decline in real standards of living over the forthcoming year?

Mr. Short: It does not necessarily do so, but we hope very much that trade unions and employers—it takes two parties to make an agreement—will adhere to the social contract during the coming year.

Mr. Loyden: Referring to the speech of my right hon. Friend the Chancellor at Leeds, may I ask the Lord President to take into account the fact that the decisions taken in the last Budget were allegedly designed to offset the possibility of high unemployment and that unemployment running at a level of 750,000 is a completely unacceptable figure? Will he bring it to the attention of his right hon. Friend that the Labour Party manifesto was designed to combat the problems that the Budget evidently has not combated?

Mr. Short: The unemployment figure in Britain is the lowest in the developed world and it is rising much more slowly than anywhere else. As to the Budget, my right hon. Friend took massive steps

to prevent unemployment this year. He will have increased consumer demand by the middle of this year by about £600 million and he gave enormous help to firms with cash difficulties.

Oral Answers to Questions — STRETFORD

Mr. Churchill: asked the Prime Minister if he will pay an official visit to Stretford.

Mr. Edward Short: I have been asked to reply.
My right hon. Friend has at present no plans to do so.

Mr. Churchill: Is the right hon. Gentleman aware that when, at the time of the last election, the Prime Minister came to speak for me in Stretford, he made all sorts of glib remarks and gave all sorts of assurances about unemployment? Is the right hon. Gentleman aware that unemployment in my constituency has risen by approximately 50 per cent. since his Government came to office? Is he further aware of the gross unfairness being perpetrated under the so-called "social contract", which is nothing but a cloak for a wages free-for-all in which the bully boys reap the bonuses? Last year average earnings increased by 28½ per cent. Since many workers obtained substantially more, inevitably many millions had to make do with much less. Can the right hon. Gentleman say how many millions of workers got nothing like that?

Mr. Short: The hon. Gentleman has put his supplementary question with his usual objectivity. I went to Stretford as well, and I certainly did not speak for the hon. Gentleman. [Interruption.] The hon. Gentleman very nearly got beaten. He will be beaten next time. The unemployment figure for Stretford is 2·9 per cent., which is only marginally fractionally above the national level. I agree that it is too high a figure. But once the present Government's policies have worked through, and when this Government have mastered inflation, as they will, the unemployment in Stretford, as elsewhere, will certainly fall.

Mr. Skinner: Has my right hon. Friend seen the recent speech of the hon. Member for Stretford (Mr. Churchill) in


which he was speaking about the forthcoming ballot for the Conservative Party leadership—this rather curious ballot—and in which he said he believed that the present Leader of the Opposition could survive if he could get back to the sort of 1970 vintage? Has my right hon. Friend also heard of the possible injunction that may be sought against this particular ballot, as it is asking for a 65 per cent.—

Mr. Evelyn King: On a point of order, Mr. Speaker. May I submit to you that what has already been heard in respect of this question is out of order and has nothing whatever to do with the Question on the Order Paper?

Mr. Fernyhough: Further to that point of order, Mr. Speaker. Over recent years the Chair has constantly ruled that points of order arising during Question Time must be taken at the end of Question Time.

Mr. Speaker: The Chair has always said that it would prefer points of order to be raised at the end of Question Time. The hon. Member for Bolsover (Mr. Skinner) certainly was going fairly wide. I hope that he will conclude.

Mr. Skinner: I was asking my right hon. Friend whether he had heard of the rumour that an injunction was to be sought against the conduct of that ballot in view of the necessity of a 65 per cent. majority—

Mr. Churchill: On a point of order, Mr. Speaker.

Mr. Skinner: —which is against democratic principles.

Mr. Churchill: On a point of order, Mr. Speaker.

Mr. Speaker: Order. That is the end of the supplementary question. Does the hon. Member wish to raise a point of order?

Mr. Churchill: Yes, Mr. Speaker. I am not aware that this supplementary question by the hon. Member for Bolsover (Mr. Skinner) has anything whatever to do with a potential visit by the Prime Minister to Stretford.

Mr. Short: rose—

Mr. Speaker: Order. One of the troubles is that supplementary questions very often are far away from the original Question.

Mr. Short: You took the words out of my mouth, Mr. Speaker. I was about to say "Nor has the supplementary question of the hon. Member for Stretford (Mr. Churchill)", but as he asked it I would not dream—

Mr. Churchill: I asked about the unemployment figures.

Mr. Short: Given the unemployment figures, I would not dream of commenting on the difficulties of the Conservative Party. Unfortunately, the hon. Gentleman's speeches are not essential reading for me.

Mr. Peyton: May one congratulate the right hon. Gentleman on his discretion, because he already has his hands well filled with his own difficulties? If he will look behind him, and particularly to his right, he will find plenty.

Mr. Short: I thought that when the right hon. Gentleman got to his feet he was going to ask me for the reply to the question he put to me last week when he challenged me to publish the figures about the relative efficiency and productivity in publicly-owned industries and privately-owned industries. I have given these to the Press. I shall not give them to the House now. They are now with the Press.

Mr. Peyton: Is the right hon. Gentleman aware that kindness forebade me even to refer to so meagre an answer?

Mr. Short: In view of that, Mr. Speaker, I really feel, with permission—[Interruption.] The net output per employee between 1963 and 1973 has risen by 158 per cent. in public corporations.

Mrs. Kellett-Bowman: On a point of order, Mr. Speaker. [Interruption.]

Mr. Speaker: Order. The House really is behaving extremely badly—both sides of it. Noise from one side leads to noise from the other side. My purpose is to get as many Questions asked and answered as possible. That has not been possible this afternoon.

Mrs. Kellett-Bowman: On a point of order, Mr. Speaker. Is it in order for the


Leader of the House to give an answer to a question which has not been asked?

Mr. Short: The right hon. Member for Yeovil (Mr. Peyton) asked the question, so I was going to help him—[Interruption.] In the 10 years between 1963 and 1973, net output per employee—

Mr. Speaker: Order. The hon. Member for Lancaster (Mrs. Kellett-Bowman) raised a point of order. In fact, the Chair has no control over a Minister's answer. He can give the answer he wishes.

Mr. Short: Net output per employee has risen in the public corporations by 158 per cent. and in private corporations by 98 per cent. In 1973 net output per employee was 31 per cent. higher in public corporations than it was in private industry.

Later—

Mr. Rost: On a point of order, Mr. Speaker. May we have your guidance? At the end of Question Time the Lord President made a statement which presumably was not related to any Question he was answering. Therefore, it must have been an official Government statement. It contained a statistical matter which was not only inaccurate but misleading, and which appeared to distort the position of the public sector as opposed to the private sector. May we have your guidance as to when we may cross-examine the right hon. Gentleman? As it is not a matter which is within his own ministerial responsibility, it will presumably not be possible for us to put on the Order Paper further Written or Oral Questions to the right hon. Gentleman. Therefore, the only appropriate time appears to be now.

Mr. Short: Further to that point of order. Perhaps I can help you, Mr. Speaker. The figures I quoted were from the Department of Industry survey "National Income and Expenditure 1973".

Mr. Thorpe: Further to that point of order. No one asked the right hon. Gentleman where he got his figures from. Surely it is unprecedented for a right hon. Gentleman on the Opposition Front Bench to throw out a challenge to a Minister, who then, about a week later,

without notice, comes with a piece of paper—

Mrs. Kellett-Bowman: Hear, hear.

Mr. Thorpe: —proceeds to read an answer and then sits down. Surely we should either have a statement—

Mrs. Kellett-Bowman: Hear, hear.

Mr. Thorpe: I can manage without the hon. Lady's assistance.
Surely the Leader of the House himself would be the first to agree that it makes for orderly business if we either have a statement on the usual basis on which statements are made, with questions allowed from both sides, or a Written Answer or something quite different—namely, a speech. But this is the most extraordinary thing. Who will next appear with a piece of paper to say that somebody asked him something six months ago and that he has just found the answer?

Mr. Speaker: I do not think that there was any breach of order. There is nothing in the Standing Orders which was offended against. I think that it was partly the fault of the House, because there was a great deal of noise, provoked from one side or the other and responded to by one side or the other. Therefore, I did not hear what the Lord President of the Council said. I rather understood that he was being coaxed into his reply by the right hon. Member for Yeovil (Mr. Peyton). But as the House was making so much noise I did not hear what the Lord President said. Anyway, the Chair has no power to control a ministerial answer.

Mr. Peyton: I should like to apologise for any contribution I made to your embarrassment and difficulties, Mr. Speaker. At the same time, I should like most warmly to congratulate you on not having heard the contribution of the Leader of the House, which was totally superfluous, quite unnecessary and, in so far as it contained information, quite misleading.

TRAWLER "MORENA" (LOSS)

Mr. Higgins: (by Private Notice) asked the Secretary of State for Trade what further information he has regarding the missing trawler "Morena".

The following Question stood upon the Order Paper:

Mr. JAMES JOHNSON: To ask the Secretary of State for Trade whether he proposes to order an inquiry into the loss of the fishing vessel "Morena".

The Under-Secretary of State for Trade (Mr. Clinton Davis): With permission, I will answer this Question and Question No. 74, for Written Answer, together.
I much regret to have to inform the House that the search for the "Morena" was called off at dusk on 28th January and it must be assumed that the vessel and her crew of three, one of whom is British, have been lost. I understand that before starting her voyage the "Morena" had been purchased by a person understood to be a Danish citizen, and it was, therefore, struck off the United Kingdom register on 9th January 1975. None the less, since witnesses to the circumstances of the disappearance may be found in the United Kingdom, I have ordered a statutory preliminary inquiry to be held under Section 464 of the Merchant Shipping Act 1894.
I am sure the House will wish to join me in extending sympathy to the relatives and friends, both in this country and abroad, of those who must be presumed to have lost their lives.

Mr. Higgins: The House will, naturally, wish to join the Minister in his expressions of sympathy. Is he aware that his statement on Monday regarding this matter gave some cause for concern? He suggested that the aircraft search was not asked for earlier because the position of the fishing vessel was not known and because some 20 vessels were already looking for it. Surely in these circumstances there would be a stronger case for an aircraft search rather than a lesser one.
Second, the Minister indicated that alarms of this kind were being raised about every month or so, and clearly, in these circumstances there is some danger of cries of "Wolf" and reactions being correspondingly slower. Will he consider looking into the question whether the radio equipment on board such vessels should be raised to a higher standard?
Third, on the question of timing, it would appear, again from the Minister's

answer on Monday, that there was a delay of at least one and a half hours. If that had not happened, it might have enabled some search to be made about 14 hours before it was actually made. While in no way diminishing the splendid work done by the rescue services, may I ask the Minister to look into this point very carefully and to consider what improvements can be made, particularly on the question of communications, in situations in which obviously time is very important?

Mr. Davis: I must preface my observations on the hon. Gentleman's question with the inhibitions I mentioned in relation to the other matter about which we were being questioned on Monday: that once a form of inquiry—a preliminary inquiry or a formal inquiry—is set afoot, there are difficulties in going into the merits of the matter. However, subject to that, the hon. Gentleman has asked whether there is a stronger case for aircraft search where a number of vessels are already searching for a missing vessel. The presence of a large number of vessels can inhibit a search by aircraft. There is the difficulty of identifying the missing vessel. I do not wish to reflect upon the Opposition attitude in this specific case, but one must take account of visibility and weather conditions, the possibility of a false alarm, and so on, before embarking upon a search by air.
We have to take account also of the people who are directing operations on the spot. We do not want to impose upon them some stereotyped form of approach from Whitehall which may have no relevance to their problems.
As for radio equipment, on 1st January we introduced new radio rules for fishing vessels. These will require a considerably higher standard of radio installation in fishing vessels, although, of course, this particular vessel may not have been covered by the regulations since they apply only to vessels of 24·4 metres and over in length. There will have to be a transitional period to enable these new rules to become effective, but I think that they represent a substantially important part of the provisions that the hon. Member for Worthing (Mr. Higgins) is seeking.
The question of the delay must be a matter for the preliminary inquiry.

Mr. James Johnson: Although the men concerned are not my constituents, may I, by courtesy of my right hon. Friend the Member for Grimsby (Mr. Crosland), be allowed to voice my deepest sympathy and condolences to the families of the missing men? The fishing community of Humberside is at one in this matter; both banks feel together about it.
Will my hon. Friend confirm, in spite of criticisms from the Conservative benches, that this is a matter for the preliminary inquiry? If the Minister orders a formal inquiry the facts will all come out then. As for the weather, is he aware that skipper Kjeerguard of the "Andolas" was fishing at this time and was in touch with the "Morena"? He says that he has never seen such weather conditions in 20 years in the North Sea. He was 150 miles off shore, and in his words it was
sheer murder with waves over 60 ft high.
Is my hon. Friend aware that the Humberside coastguard and RAF Leconfield and other stations have a wonderful record of rescue at sea, and I wish to pay tribute to those who have done this work. I have been in touch with Hull, and I may say on behalf of skippers and seamen that they feel that any measures that could have been taken were taken.

Mr. Davis: I am sure that my right hon. Friend the Member for Grimsby (Mr. Crosland) will appreciate the observation that my hon. Friend has made on his behalf. I do not want in any way to criticise the hon. Member for Worthing, who made perfectly proper observations from the Opposition Front Bench in seeking information from me about this unhappy episode.
Undoubtedly the weather was appalling, and that fact made the search that much more difficult. I am grateful to my hon. Friend for his remarks and the appropriate tribute he paid to the coastguard and to those who are involved in the difficult enterprise of trying to save life at sea. It may be appropriate for me to add to that tribute by saying that the number of persons assisted last year was 6,760 compared with 5,060 the previous year, and that in its own way pays sufficient testimony to the invaluable work of these people.

Mr. Warren: Will the Minister bear in mind that this is not the only loss of its

kind that we have heard about in the House over the last several years? Would it not be helpful if every fishing vessel carried a survival rescue beacon of the kind which is available to every pilot who has to bale out over the sea? It would operate on a frequency which could be picked up by the Royal Air Force immediately. As I understand it, the principal problem in these searches is to locate the last known position of the vessel, and this could be done quite readily with equipment which is already available.

Mr. Davis: I announced quite recently that this subject is under inquiry by my Department. [An HON. MEMBER: "Speed it up."] It is not easy to come to a quick decision about technical matters of this kind. We want to ensure that the best equipment is installed in vessels and that we do not rush into something we might regret later.

Mr. Spriggs: Will my hon. Friend take measures that would provide prevention rather than a cure that comes too late? Will he take into account the fact that masters of vessels, no matter how small the vessels, determine for themselves whether the vessel shall put to sea and whether a fishing vessel shall remain fishing in heavy weather? Will he take special measures to consider these points and to provide that there should be a definite rule that when weather warnings are given a master must run for shelter?

Mr. Davis: It is extremely difficult to prescribe specific rules to deal with a situation of this kind. We are dealing here with the competence of a master to adjudge a particular situation, and it may be that a number of them fall down on their job. If they do and if a tragedy occurs, it is a little late in the day to complain and criticise. By and large, however, it would be unfair for the House to give the impression today that there is a wholesale abandonment of the proper discretion exercised by masters of vessels of this character.

Mr. Spriggs: They are fishing in heavy weather.

Mr. Watt: When will the proposed regulations on safety at sea be published, and when will the House have an opportunity to debate them? It is too bad that it requires a tragedy at sea to bring


these safety matters to the attention of the House.

Mr. Davis: I cannot give the hon. Member an answer because matters of safety of life at sea cover a very wide area. It is within the hon. Member's ability to apply for a debate at a given time if he wishes to raise a specific matter.

Mr. Stott: Has it not now become apparent, with the loss of the "Lovat" over the weekend and the assumed loss of the "Morena", that there are understandable difficulties in co-ordinating an air-sea rescue service? I make this point seriously as an ex-seaman. I am trying to convey the fears which are now felt by my colleagues in the industry. Is it not now time for my hon. Friend's Department to consider seriously the possibilities of creating an air-sea rescue servcice under a statutory marine authority which would be able to deal with the position of ships which are faced with these prevailing conditions at sea?

Mr. Davis: My Department is considering the subject. I do not think that the answers are very easy, although the question is an easy one to ask. There is no assurance that even if we had a substantial department or organisation handling this matter we would necessarily overcome the problems we already experience from time to time. However, I am certainly not seeking to give the impression that I set my mind against the concept of a marine authority. The pros and cons will be very carefully considered within the course of the next month.

Mr. Churchill: Can the Minister say what individual has the responsibility in such circumstances of initiating an air search and deciding whether it is a bona fide case which merits a Nimrod being sent? He will recall that in his statement to the House on Monday he said that one of the reasons why a Nimrod had not been sent was that the position given for the "Morena" was inaccurate. How can he be sure of that, as no search was being made?

Mr. Davis: The coastguard has the prime responsibility for co-ordination in these matters.
In his second question the hon. Gentleman was asking me to comment on a matter which clearly falls within the ambit of the preliminary inquiry.

BUSINESS OF THE HOUSE

Mr. Heath: Will the Leader of the House kindly give us as accurate a picture as he can of the business for next week?

The Lord President of the Council and Leader of the House of Commons (Mr. Edward Short): Yes, Sir.
The business for next week will be as follows:
MONDAY 3RD FEBRUARY AND TUESDAY 4TH FEBRUARY—There will be a debate on Devolution, which will arise on a motion for the Adjournment of the House.
At the end on Monday, there will be a motion relating to the Import Duties (General) (No. 5) Order, 1974.
At the end on Tuesday, there will be motions on EEC Documents on Agriculture (R/27/75 and R/82/75).
WEDNESDAY 5TH FEBRUARY—Remaining stages of the Housing Rents and Subsidies (Scotland) Bill.
Second Reading of the District Courts (Scotland) Bill [Lords].
THURSDAY 6TH FEBRUARY—Supply [9th Allotted Day]: There will be a debate on Housing.
Motion on EEC Documents on Doctors and Dentists (COM(69)127 and R/2610/74).
FRIDAY 7TH FEBRUARY—Private Members' Bills.
MONDAY 10TH FEBRUARY—Consideration of Private Members' motions until seven o'clock. Afterwards, Second Reading of the Export Guarantees Amendment Bill.

Mr. Heath: Can the right hon. Gentleman confirm that if right hon. or hon. Members wish to speak about the general subject of devolution in the debate on Monday and Tuesday they will be able to do it on both days, as the debate is on the motion for the Adjournment? Some may wish to speak about it in connection with their own areas, but others may wish


to speak about devolution in respect of the United Kingdom as a whole. It would be difficult to try to divide the two days into particular aspects of the United Kingdom.
Secondly, can the right hon. Gentleman now be a little more specific about a foreign affairs debate? Many hon. Members are worried about events in Cyprus and the Middle East. Considerable dissatisfaction was expressed on Monday on Foreign Office Questions. It would be helpful if the right hon. Gentleman could be more specific now.
Thirdly, I think that the right hon. Gentleman will recognise that there is considerable anxiety in the country as well as in the House about the statement reported to have been made by the Government's industrial adviser, Sir Don Ryder, that another major company was in serious financial difficulties and in need of assistance. Can the right hon. Gentleman get this cleared up by a statement from the Secretary of State for Industry?

Mr. Short: With regard to the devolution debate, I entirely agree with the right hon. Gentleman that it would be inappropriate to try to divide the two days, so both days will be open for debates on the subject generally.
I am sorry that I cannot yet be more specific about a debate on foreign affairs, but I understand that my right hon. Friend the Foreign and Commonwealth Secretary wishes to make a statement on Cyprus next week.
I am told that Sir Don Ryder denies having made the statement of which the right hon. Gentleman spoke. He says that he knows of no firm which is in difficulties of the kind described. He made the point that if inflation continued at the present rate many firms would be under considerable pressure, but he entirely denies making the statement attributed to him in the Press.

Mr. Faulds: Is it within the Lord President's powers to do something about the steep decline in the performance of the telephone service in the House from what was not a very good level?

Mr. Short: I shall look into that. As far as I am concerned, it works excellently—much better than it has ever done. I think that there are fewer complaints

than there have been in my 25 years here.

Rev. Ian Paisley: As the report of the Gardiner Committee has now been published, and there has been no statement of the Government's intentions, can the right hon. Gentleman tell us when we may expect a Government statement and a debate upon what is a very important matter in the present grave situation in Northern Ireland?

Mr. Short: I shall convey to my right hon. Friend the Secretary of State for Northern Ireland what the hon. Gentleman said. But I am sure that the hon. Gentleman and all other hon. Members will want time to read the report, which is a very important document. However, I shall bear in mind what the hon. Gentleman said.

Mr. Prescott: Will it be possible to provide time to discuss the recommendations of the Select Committee on Members' Interests, in view of the establishment of another Select Committee to look into the affair of the right hon. Member for Walsall, North (Mr. Stonehouse) and the reports in the Press that organisations are being set up to inquire into the financial interests of hon. Members in order to blackmail them?

Mr. Short: We have not had the report for very long. I have now studied it carefully and hope that we can have a debate on it before long.

Mr. Mates: Is the Leader of the House aware of Early Day Motion No. 212, which stands in my name and in those of 60 other hon. Members from all parts of the House? Is he further aware that I am most grateful for his reply during points of order last Monday, when he indicated his sympathy with my predicament?
Will the right hon. Gentleman consider further the matter of the Farriers (Registration) Bill, which I am seeking to introduce, since it has the support of every organisation in the country concerned with the welfare of the horse and the future of the trade of farriery? May I suggest that there is a way in which he could, if he felt so inclined, bring this whole unfortunate incident to a close, which is to indicate that the Government will not oppose the Second Reading of


the Bill when it comes up again tomorrow? If he feels able to do that, my hon. Friends and I, who are sponsoring the Bill, will be prepared to meet all the objections raised by the Under-Secretary of State for the Home Department during her speech last Friday. We do not seek to have the Bill passed in the face of any opposition from anywhere. All we want to see is a piece of well-thought-out legislation put on the statute books.

[That this House notes with dismay the circumstances in which the Farriers (Registration) Bill failed to get a Second Reading on Friday 24th January due to the tactics of the Government; recognises that Private Members' Bills make an important and valuable contribution to the work of this House; and requests that the whole issue of Private Members' Bills and the devices for blocking them he referred to the Select Committee on Procedure forthwith.]

Mr. Short: As I said last week, I have sympathy with the hon. Member's difficulty. However, he has no prescriptive right to get his Bill through. Had he ensured that he had the right number of hon. Members here last Friday, he could have got the Bill through. The Government did not oppose it. If the hon. Gentleman had done his work previously he would have got his Bill through. However, other opportunities will arise shortly, and the hon. Gentleman will have to do his best.

Mr. Terry Walker: May I draw the Lord President's attention to Early Day Motion No. 207 drawing attention to the deteriorating position in the footwear industry? Will he please arrange a time for this matter to be debated as soon as possible?

[That this House, mindful of the deteriorating position of the British footwear industry, seeks a broad-based and urgent Government inquiry into every aspect of footwear with the objective of stopping this decline and safeguarding employment.]

Mr. Short: I am afraid that I cannot offer any time in the near future for a debate on the footwear industry. However, I shall certainly draw the attention of my right hon. Friends the Secretaries of State for Trade and for Industry to the motion.

Mr. Rathbone: Is the Lord President of the Council aware—I hope he is—of the Price Commission report which was published last week? Is he prepared to allow time for the House to debate the now-established weakness in the social contract, in that inflation is now being powered almost entirely from locally manipulated wage increases?

Mr. Short: I cannot offer any time in the near future. However, there will be a debate on the Price Code after 10 o'clock tonight.

Mr. Arthur Lewis: Will the Leader of the House try to get the Secretary of State for Trade to make a statement on Monday concerning his truly magnificent efforts during his recent visit to Iran, from which he returned today? Will my right hon. Friend ask the Secretary of State to explain how it is that he was so successful when we were told that, if we were desirous of coming out of the Common Market, it would ruin all our possibilities of trade? How has that affected his efforts?

Mr. Short: The House will wish to congratulate my right hon. Friend. I can do better than my hon. Friend suggested. My right hon. Friend will be making a statement tomorrow.

Mr. Henderson: Has the Lord President's attention been drawn to the motion lodged in the names of some of my hon. Friends and myself to amend Standing Order No. 62, concerning the nomination of Standing Committees? Has he received the representations which I made to him in that regard, asking for this matter to be discussed? Is he aware that many people in Scotland consider scandalous the way in which membership of Committees of this House dealing with Scottish legislation totally fails to reflect the balance of parties within Scotland? In view of the Government's determination to establish a Scottish Assembly, is not this an appropriate time to make the amendment to the Standing Order?

Mr. Short: I have seen this proposal and have considered it carefully. I will look at it again and perhaps discuss it with the hon. Gentleman. Clearly, if any change is to be made to the basis of selection, it will have to be considered by the Select Committee on Procedure. I shall


be very happy to talk to the hon. Gentleman about it.

Mr. Frank Allaun: May we have a statement next week on the supply of military spares to the Armed Forces of South Africa, which is contrary to the policy of the Labour Government and the Labour Party since 1968?

Mr. Short: Not next week, Sir. However, I am sure that if my hon. Friend has any specific points which he wishes to be considered, my right hon. Friend the Secretary of State for Defence will be happy to talk to him.

Mr. Fry: Will the Leader of the House tell us when we may expect the reintroduction of the compulsory seat belts legislation? That legislation appears to have a somewhat lower priority in the Government's programme. In view of that, is there a possibility that we shall not see the reintroduction of this Bill?

Mr. Short: If the hon. Gentleman will contain himself a little longer, he will be gratified to see this Bill coming forward again.

Mr. Atkinson: Will the Leader of the House be more specific about the statements next week? Is the House to assume that the Prime Minister will make a statement on Monday following his visit to the United States and Canada? Will the Leader of the House therefore request the Foreign Secretary to make a statement on Thursday? Presumably the Foreign Secretary will want to make some comments about the discussions he has had with Ivor Richard, at the United Nations. In view of the impending initiatives to be taken by the United Nations in respect of Resolution No. 353, will my right hon. Friend now give some assurance that we shall be able to debate the statement made by the Foreign Secretary and not merely leave it as a statement to the House? I say that because the last time we had a chance of doing so was on 31st July 1974.

Mr. Short: That is not strictly correct. There was an opportunity, on the Gracious Speech, to debate foreign affairs. Indeed the Foreign Secretary asked to be allowed to make a speech on that occasion. The only statement I have announced for next week is that which I

understood the Foreign Secretary wished to make. However, I shall call my hon. Friend's suggestion to the attention of the Prime Minister and the Foreign Secretary.

Mrs. Kellett-Bowman: Will the Leader of the House accept that I am delighted that he is coming to my constituency tomorrow, notice of which visit I received only five minutes ago? While he is there, will he be good enough to inquire into the reasons for the unemployment rate of 5·3 per cent. in Lancaster and draw to the attention of the Prime Minister the absolutely vital importance of maintaining the Heysham-Belfast ferry, and of making an announcement in the House during the coming week that he will maintain this ferry, which is vital not only to employment in my area but also to Irish-English relations?

Mr. Short: I shall inquire into the subject of the ferry when I visit Lancaster tomorrow, and all the other relevant matters.

Mr. Urwin: I have no doubt that my right hon. Friend is fully aware of the large numbers of people who have suffered financial loss in forfeiture of holidays as a result of the Court Line disaster. Bearing in mind the large number of inquiries which hon. Members are receiving now from the unfortunate victims of that tragedy, will my right hon. Friend exercise his influence on the Secretary of State for Trade and ensure that legislation is brought forward at an early date to deal with the matter?

Mr. Short: Yes, Sir. We are doing all we can to expedite that. I understand my right hon. Friend's feelings in this matter. A great many hon. Members have received letters about it. Therefore I shall do all I can to expedite the matter.

Mr. Mather: Is the Leader of the House aware that his reply to my hon. Friend the Member for Petersfield (Mr. Mates) is most disappointing? Far from being a prescriptive right for back-bench Members, the situation came about as a result of a mean strategem by the Govment. Is the right hon. Gentleman further aware that back benchers on both sides of the House are not prepared to be ridden over roughshod?

Mr. Short: I well understand what the hon. Gentleman is talking about when he says that. All Governments have taken views about Private Members' Bills. There is no harm in the Government having an attitude towards a Private Member's Bill. On this occasion the Government did not oppose the Bill. I have said that I have a good deal of sympathy over the difficulty in which the hon. Member finds himself. He is a new Member. I am not saying this in any patronising way, but I think that, if he had had a little more experience he would have ensured that he had the right number of Members present. He will have a number of other opportunities before the time runs out for Private Members' Bills. He must work at it, as do all other hon. Members.

Mr. Kilroy-Silk: Is my right hon. Friend aware that the Chancellor of the Exchequer last night managed to find about £200 million worth of spare taxable capacity in the rich with which to abolish the earnings rule? If that is the case, will he therefore seek extra spare taxable capacity among the rich so that we can eliminate the burden put upon the school children of this country by the Conservative Government when they introduced discrimination and the ending of free school milk? Will my right hon. Friend have consultations with the Chancellor and the Secretary of State—

Mr. Speaker: Order. The question must be related in some way to the business of the House.

Mr. Kilroy-Silk: Will my right hon. Friend have consultations with the Chancellor of the Exchequer and the Secretary of State for Education and Science with a view to bringing in early legislation for the reintroduction of free school milk?

Mr. Short: I shall pass on that suggestion to my right hon. Friends. But, bearing in mind the borrowing requirement that we inherited—[Interruption.] I do not know what the right hon. Member for Yeovil (Mr. Peyton) is laughing his head off about. We inherited a borrowing requirement of £4,000 million, and it has necessarily gone up this year to more than £6,000 million. In view of that, the stratagem adopted by the right hon. Gentleman and his hon. Friends last

night was sheer irresponsibility as well as being humbug.

Mr. Peyton: The Leader of the House in that last answer neglected the one item of growth for which this Government have been responsible. May I put three matters to him about the business for next week? First, will he bear in mind that, generally speaking, statements on Fridays are a source of inconvenience and that it is very much better that they should be made on other days? It is much more for the convenience of the House.
Secondly, will the right hon. Gentleman prevail upon the Secretary of State for Energy to make a statement next week about the acquisition by the Bank of England of the Burmah oil shares in BP?
Thirdly, may I ask him to be a little more forthcoming to my hon. Friend the Member for Petersfield (Mr. Mates)? He has a very worthy measure which a great many hon. Members would like to see on the statute book. As the right hon. Gentleman said, the Government have not opposed it. I hope that he will take an opportunity, which is after all very much more easily available to him than to my hon. Friend, to see this legislation on its way.

Mr. Short: Dealing with the right hon. Gentleman's first point about statements on a Friday, I remind him that right hon. and hon. Members constantly complain about statements not being made in the House. There are so many statements to be made that it is necessary to have some on Fridays occasionally, otherwise the remainder of the week would be cluttered up with them.
As for Burmah Oil, I have said already that because of the complexity of the matter I suggest that a Question be tabled to my right hon. Friend the Secretary of State for Energy or to the Prime Minister. But I will pass on the right hon. Gentleman's request to the Secretary of State for Energy.
There is nothing else that I can say about the Farriers (Registration) Bill. A great many hon. Members have Private Members' Bills, both Ballot Bills and Ten-Minute Bills. The hon. Member for Petersfield must work on it and take his chance like everyone else.

Mr. Skinner: In relation to next week's business, will my right hon. Friend bear in mind that a number of Government supporters from this side of the Border are a little concerned about the fact that we seem to be overloaded with matters affecting the Celtic fringes? In view of that, would not it be sensible to take note of Early Day Motion No. 152, which by tomorrow morning will have about 80 signatories, concerning the Shrewsbury pickets and the fact that they have now been languishing in gaol for a consider-sable time? Will my right hon. Friend also bear in mind that there are many Government supporters who, although they have not signed the motion either because they are Government Ministers or perhaps because they think that the sentences are not excessive, nevertheless have a great deal of sympathy with the motion, and that perhaps a debate would be conclusive on this matter and would possibly secure the immediate release of these men?
[That this House calls for the immediate release from jail of the Shrewsbury trade unionists.]

Mr. Short: On my hon. Friend's point about the Celtic fringe, we have not yet debated the Kilbrandon Report. I felt that it was proper to have a debate. I was asked for a two-day debate, and I agreed to that request. I hope that it will provide an opportunity for a debate on the whole question of devolution.
I am afraid that I cannot give any satisfactory answer to my hon. Friend's second question. The responsibility is wholly with my right hon. Friend the Home Secretary, and he has already answered a number of questions on this matter.

Mr. Peter Morrison: In view of the fact that the unemployment figures continue to rise, will the right hon. Gentleman make time available for a full debate on the unemployment situation?

Mr. Short: That would be an appropriate subject for a Supply Day.

Several Hon. Members: rose—

Mr. Speaker: Order. We must move on.
With regard to the business for next week, I hope to be able to make a statement on Monday about the Committee

of hon. Members to examine the Compton Report.

WATER RATES (NEWPORT)

Mr. Roy Hughes: On a point of order, Mr. Speaker. I wish to raise a matter of which I have given you prior notice. It concerns Parliamentary Question No. 15 on Monday of this week addressed to the Secretary of State for Wales in which I asked about the proposals of the Welsh National Water Development Authority to increase water charges to the borough of Newport by 142 per cent. and sewerage charges by between 150 per cent. and 200 per cent.
I was told by the Under-Secretary of State that no representations had been received from the borough concerning these proposed charges. I have discovered that this is not true and that the borough has made the strongest possible representations. It would have been failing in its duty to the people of Newport if it had not done so. I can assure the House that there is very strong feeling in the town about this matter. I may say that during the past few hours I have received a written apology from the Under-Secretary. But in view of the importance of this matter, I feel that the records of the House should be corrected.

The Under-Secretary of State for Wales (Mr. Edward Rowlands): Further to that point of order, Mr. Speaker. I regret that there was a factual error in my reply last Monday to my hon. Friend's Question on this local matter. However, as soon as I discovered the error, I apologised personally to my hon. Friend, as did my right hon. Friend the Secretary of State. I have now also written to my hon. Friend repeating my apology and correcting my error.

Mr. Speaker: The point of order has been made, and the record has been put right.

ROYAL ASSENT

Mr. Speaker: I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Act:
Consolidated Fund Act 1975.

STATUTORY INSTRUMENTS

Ordered,
That the draft Noise Insulation (Scotland) Regulations 1975 be referred to a Standing Committee on Statutory Instruments—(Mr. Thomas Cox.)

Ordered,
That the draft Misuse of Drugs Act 1971 (Modification) Order 1975 be referred to a Standing Committee on Statutory Instruments.—(Mr. Thomas Cox.)

Orders of the Day — PRICES BILL

Order for Second Reading read.

Mr. Speaker: I have selected the amendment in the name of the Leader of the Opposition.

Mr. Richard Wainwright: On a point of order, Mr. Speaker. Would you consider giving further guidance to the House as to its opportunities sometimes to debate amendments tabled on Second Readings and similar occasions by minority groups on both sides of the House, especially as to how the Chair might be released from binding constraints which derive from very different parliamentary considerations? The matter arises today in respect of the amendment tabled last Friday by my right hon. Friend the Leader of the Liberal Party and other Liberal Members.

Mr. Speaker: I have sympathy with this point of view. It is a matter which is being looked into by the Committee on Procedure.
Today it is not a question of debate, because everything that might be said about the Liberal amendment can be said in the debate on the other amendment. It is more a question of voting, and I have no power under Standing Orders to allow a vote after 10 o'clock on a second amendment. I felt it right to select the official Opposition amendment. I am afraid that that must remain the position until there is some decision altering Standing Orders to enable me on occasion—I would not dream of doing it always—to call another amendment for Division as well as for discussion.

4.19 p.m.

The Secretary of State for Prices and Consumer Protection (Mrs. Shirley Williams): I beg to move, That the Bill be now read a Second time.
The main purpose of this short Bill is to enable food subsidies to be continued into the year 1975–76. It still remains our intention eventually to run down the programme, but the timing of any running down of the food subsidy programme must be related closely to the introduction of appropriate social benefits. I have said


this on frequent occasions, most recently in reply to a Question from the hon. Member for Barkston Ash (Mr. Alison) on 11th November, when I said:
I have always made clear that in the long run our hope is that we might be able to phase out subsidies in the interests of other kinds of social expenditure."—[Official Report. 11th November 1974; Vol. 881, c. 8.]
The House knows that a number of proposals have been put forward by the Government in respect of increases in the value of pensions and other related social benefits, a new scheme of child and family benefits, and help for the aged. But for a number of reasons, some of them administrative, these social benefits cannot all be paid immediately, and therefore the Government feel that if they are to assist the less-well-off and the most vulnerable groups in the community it is appropriate to do so through the mechanism of food subsidies until such time as they can be assisted in other and more long-term ways. That remains the view of the Government.
Subsidies are part of a wider policy which includes such matters as the control of rents, assistance given to domestic rates, the establishment and continuation of the Price Code and some tightening with regard to the three-month freeze and to reference profits. It is also part of the Government's intention that subsidies should be very much directed towards some redistribution of income and wealth in the community.
I shall deal with all these points one after another and also with what has emerged as the repeated—indeed, parrotted—argument about food subsidies, that they are indiscriminate, do not help the poor, are expensive, and so on. Almost none of these criticisms stands up to careful investigation.

Mr. Richard Wainwright: rose—

Mrs. Williams: Perhaps the hon. Gentleman will allow himself to come in on that part of my speech because it would be better if first I put before the House the details of the Bill. I will come back to the point in which the hon. Gentleman is interested and will then give way.
Broadly, we are at present subsidising six basic foods, two of which were subsi

dised by the Conservative Government in one form or another. These were milk and butter, on which the Conservative Government accepted the Community's FEOGA scheme, which I shall say more about later.
We chose four additional products for subsidy—bread, cheese, flour and tea—both because of their importance to the budgets of low-income families and not least of pensioners, and because in every case the elasticity of demand is low—that is to say, a reduction in their price leads to a very small and, in some cases, almost infinitesimal change in demand. Indeed, it is fair to say that the National Food Survey has shown that the elasticity of milk demand is about one-tenth of 1 per cent. in respect of every 1 per cent. change in price, and that with butter the difference is about one-third of 1 per cent. for every 1 per cent. change in price.
I will also come back to this point, because it goes a long way to show that the extreme comments and predictions that subsidies would cause shortages, made by the Opposition when the Prices Act was going through Parliament last spring, have not been borne out in practice. Before doing so, I should say something about expenditure on food subsidies.
During the current financial year, expenditure on food subsidies will amount to £510 million. The reason why it is not the full annual figure is that some subsidies started after the beginning of the financial year. As I told the hon. Member for Gloucester (Mrs. Oppenheim) in reply to a Question this week, the cost will be £580 million in a full year to subsidise the six products at the present rate. However, I must make it clear to her that the actual expenditure in 1975–76, short of any changes in the rate of subsidy, will be £550 million or thereabouts, because there will be a reduction in the subsidy for milk, largely owing to an increase in the price of milk for manufacture.
Therefore, in each case I make it clear that the subsidies I am talking about are on the basis of the present rate of subsidy continuing on the six products, and do not, of course, deal with any changes which may arise as a result of alteration in costs or decisions that the Government may make.

Mrs. Sally Oppenheim: Could the right hon. Lady make it clear that the figure she has just quoted is with regard to maintaining the present levels of subsidy and not to subsidising at the same rate if inflation were to continue at the same rate in the coming year?

Mrs. Williams: I thank the hon. Lady for that comment. I thought that it was what I was trying to say. But, fair enough. No one, as the hon. Lady appreciates, can predict what may happen with, for example, wheat prices, where almost everything will turn on the size of the harvest next summer.
The effect of the subsidies has been to keep the food index down by just over six points and the retail price index down by about 1½ points. Perhaps it is more understandable to the public to say that the overall effect has been a reduction in the cost of the food shopping basket of 7p in the pound.
But I think it is as important to point out that in the year January 1973 to January 1974 the food index rose by just over 20 per cent. at a time when no food was subsidised, whereas in the the past year the food index has risen at the rate of 16.3 per cent. Although I wish that the rise were lower, there has still been a helpful reduction in the increase in the food index, and a great many people appreciate what is being done to assist them.

Mr. Dan Jones: The House would benefit tremendously if my right hon. Friend would tell us, on the question of food subsidies, of the relationship to other subsidies which have been paid by successive Governments, and try to compare the values.

Mrs. Williams: My hon. Friend has great prescience. I think he must have known what I was going to say in the next 10 minutes. I will gladly give way to him again when I reach that point.
The Conservative Party has always been highly ambivalent on the subject of subsidies. In this respect, the Liberal Party has been more consistent. The Conservative Party, as recently as four months ago—it may wish that it were quickly forgotten and some of its Mem

bers wish that it had never been said—stated in its election manifesto:
With the urgent need to stabilise prices we accept that it will be necessary to retain these subsidies for the time being.
I do not think that the electorate thought that the Conservative Party meant a period of only four months. I should imagine that the electorate expected that the period would be at least a year or so. But the switch in the Conservative Party's attitude, evident in the amendment, suggests that it never meant what it said in its manifesto.
I shall show just how ambivalent the Conservative Party's attitude to subsidies has been. What has marked it throughout has been belief in some subsidies and not in others—above all, a belief in subsidies which benefit the better-off and not the less-well-off. One of the main attacks on the Prices Act and on subsidies was based on the argument that there would be major shortages in conquence. The then Opposition spokesman, the hon. Member for Southend, West (Mr. Channon) said, on Third Reading of the Prices Act:
I believe there are signs that food subsidies are in danger of leading to shortages in shops. There is already said to be a shortage of liquid milk which will lead to a shortage of cheese.
The hon. Member for Manchester, Withington (Mr. Silvester) said:
It is quite clear that it will cause some shortages."—[Official Report, 12th June 1974; Vol. 875, c. 1745 and 1757.]
But the truth of the matter is—and I urge it upon those who are really interested in the matter and are not simply making a party point—that there has been almost no movement in the consumption of subsidised foods of the kind that the Opposition constantly feared.
The average consumption of milk has gone up a little, from 4·67 pints a week in the third quarter of 1973 to 4·76 pints a week in the third quarter of 1974. That is a moderate movement, but one which I think we should welcome because of the high nutritional value of milk. The consumption of cheese has not moved at all, unless one regards as a movement a rise in average consumption from 3·84 ounces a week to 3·85 ounces. The only substantial movement has been from margarine to butter, and they are in direct


competition. But here again there has been substantial saving in the imports of raw materials for margarine to offset against imports of butter.
The overall effect has been that no serious shortages have emerged. There was some tightness in the supply of liquid milk, but those interested in agriculture will be aware that this arose not from a change in the pattern of consumption of milk but from the fact that the farmers saved on expensive dairy concentrates and the yield from dairy herds fell. But there were no shortages. There were shortages of sugar and salt, and during the last election but one there were shortages of lavatory paper. All were in the private sector. None of these was subsidised, and all these shortages arose for a variety of strange reasons, including, as the House knows, in the case of salt the extraordinary rumour that there was a strike in the Siberian saltmines and that consequently salt would be short.
It has been argued most recently in an article in New Society by a Reading university lecturer, Mr. Ritson, that the nutritional consequences of subsidies might be bad, but I must tell the author of that interesting article that he has not been able to study the most recent facts available to us. In the National Food Survey just published, which deals with the period to the third quarter of 1974, what has emerged most clearly is that families have been able to save on subsidised foods and have increased their expenditure on meat of all kinds, fresh vegetables, fish and those very items in the household budget that are most nutritious. The savings that have been made have been almost wholly in the field of convenience foods, and this is a favourable move towards which subsidies have contributed.
I would like to say a little about some of the detailed provisions of the Bill but I would assure the House that before sitting down I intend to come back to two of the major arguments used against the subsidies: first, that they are indiscriminate and secondly, that they do not assist the less well-off—because I do not believe either argument stands up for a moment to any careful study of the facts. Let me first turn to some of the details of the Bill. In Clause 1 some changes are made, in my power to pay food subsidies

under Section 1 of the Prices Act 1974. I would draw the attention of the House to the main change, which is that Clause 1(1)(c) raises the financial limit on food subsidy expenditure from £700 million to £1,200 million. I mentioned earlier that the rate of expenditure subject to there being no change in rates in the current year is likely to be about £510 million this year and £550 million next year. I would like to make clear that there is no question of going beyond that unless we get from the House a further extension of powers.
With regard to the question of a further increase in the financial limit, therefore, nothing further can be done before 1st April 1976, and that would require an order which would be subject to affirmative resolution of the House. With regard to the milk and butter subsidies, we have taken the opportunity, and I believe the House will think it sensible, to bring these in line with the overall subsidy requirements, and, therefore, the guarantee arrangements with regard to liquid milk and the arrangements for butter are both being extended at the same time. The milk subsidy has been extended to the Scottish islands. As the House will be aware, because of a technical defect in the Prices Act 1974 we have had to rest this on the authority of the Appropriation Act. I believe all sections of the House would consider it wrong not to make subsidies available to the remoter parts of Scotland, and, as we promised, we have now brought this within the specific legislative authority of the Prices Bill.
Clause 2 extends and improves powers to provide for price regulation and the provision of displays. Under this we have made two changes which I believe will be welcomed by the House. We have agreed that, at present at least, we shall not use Clause 2 of the original Prices Act as long as the voluntary agreement is in being. That expires in March, and we shall be discussing with the trade what steps we shall take to succeed that voluntary agreement. I shall come back to discuss that with the House but I thought I ought to make clear that Clause 2 remains in suspense only while the voluntary agreement is operative and the clause will still be in force under the terms of this Bill.
With regard to price regulation orders, the House will welcome the fact that after full consideration we have agreed that the prices of the most widely-demanded product lines must be displayed in every shop, but that those of all other product lines, including the more rarely purchased lines, shall be available on request. My Ministry intends widely to publicise that fact. We accept the view of the trade and consumer organisations that probably that will be more effective in informing shoppers about those lines more widely bought in clear, well-illustrated and well-displayed fashion, and to make all other prices available to them on request.
I also want to make clear that it will be made known, I hope, in individual shops as well as in other ways, that shoppers have a right to inquire as to the maximum prices of those other ranges. I would like to thank the food trade for the help it has given us in working out these display provisions. I recognise that it does not particularly like having to take on this extra burden, but I am grateful to it for assisting us to bring through these display orders, many of which are now going into operation.
I would also like to thank a very large part of the trade, if not every large firm, for the way it has tried to maintain the voluntary agreement. Our most recent monitoring showed that items in the voluntary agreement had reached only half the level of those outside, and I pay tribute to the trade for carrying out what it promised.
Finally, with regard to the duration of price regulation powers, the position is that the powers in Section 2 of the 1974 Act, which were due to expire on 31st March 1975, are now being extended and, therefore, subsection 1(1)(c) of the Bill repeals the restrictions of the 1974 Act with regard to the duration of price regulation. I have spoken on the display requirements and my hon. Friend the Minister of State will deal with any questions rising on that point from the House later in the debate.
There are only two other technical points that I want to bring before the House with regard to the Bill. The first concerns record-keeping. We are asking shopkeepers to keep records so as to

make the task of the enforcement officers easier. We shall be grateful to them for agreeing that records in this form should be kept. As for price consent, we have taken power to give that in very rare cases so as to exceed the figures in the Bill, but I can assure the House that that power will be used only in an instance, like the recent sudden increase in the price of sugar, where the position is one requiring very immediate action.
I turn now to the main arguments that have been advanced against subsidies. I have dealt with one—that subsidies create shortages. I believe one can see that if items for subsidy are carefully chosen there is very little in that argument.
I turn now to a second favourite argument advanced by both major Opposition parties, to the effect that subsidies affect rich and poor alike. There is one sense in which they do. They are universally available. We have never tried to argue otherwise. Those who argue that subsidies benefit rich and poor alike are simply totally leaving out of account the fact that subsidies are essentially based on a give-and-take scheme. They are financed out of taxation, largely out of direct income taxation, and this direct increase in taxation intended to finance subsidies was introduced at the same time as the subsidies programme itself; namely, in the last spring Budget.
The increase in taxation fell far more heavily on those households having an income of over £60 a week. Indeed, something like four-fifths of the increase in direct taxation fell on this group. But the effect of subsidies goes right across the ranks and, therefore, there comes a point, which is at a stage a little below the average wage, where the net benefit of subsidies is overtaken by the net contribution to taxation.
There is no additional contribution to taxation at all by lower-paid people but they get a disproportionate benefit from subsidies. Old-age pensioners on single pension and pensioner couple households benefit to the extent of about £13 a year, with a benefit of about £11 for individuals in all households. But, in addition, they do not contribute additional taxation towards that benefit.
There is, however, another major redistributive factor within subsidies, that


the other major beneficiaries, as well as old-age pensioners, are families with many children. This is a very important point, and I would ask the House to consider very carefully the argument that I am going to put, because it is one that has persistently been misunderstood. It is an argument with which Mr. Ritson deals effectively in an article in New Society.
The House knows—or ought to know—that the poorest households in Britain—those with incomes of less than £23 a week, to take a family expenditure survey definition—are largely one- and two-person households. I repeat that we are talking about households and not about individuals. The poorest household is one with only one or two people in it. Above all, the poorest households are those with no wage earners at all—the pensioner living on his or her own, the pensioner couple, or the widow or deserted wife with a child who is not able to go out to work. Those, as we know, are the poorest households.
But there is another group of households which, though they are given in the statistics as middle income households—by which I mean people who rejoice in a massive income of between £23 and £40 a week—are, in practice, poor. These are families which, while they may have an income of between £23 and £40 a week, have several children. A relatively limited income has to cater for all dependent mouths, yet in the family expenditure survey statistics they count as middle income households. If they were taken on a per capita basis, they would be poor households.
One of the effects of subsidies is to redistribute wealth from the one-person or two-person households, unless they are in the poorest group—the pensioner group—to the family. A household with two working people both paying tax but having no children will gain much less from subsidies and pay much more in tax than a family with one breadwinner and three or four children, because each of these children will eat food and will benefit from the £11 a year subsidies on food, and yet the breadwinner will pay less tax because he has three or four children. Quite simply, a four-child family in which the husband is working will benefit to the extent of £66 a year from subsidies and will pay very little

extra in tax—indeed, none in direct taxation if he is within this £23 to £40 band. In short, he is gaining a substantial net sum from subsidies.
I apologise to the House for dealing with this in detail, but it is consistently missed in the statistics. The reason is that the statistics are for households, and when they are used, as they often are—by Opposition spokesmen it ought in all fairness to be made clear that they distort the position because they talk not about people—and it is people who count—but about households, where the comparison cannot be exact unless one mentions the number of people in a family.
In his article in New Society Mr. Ritson explains this as follows:
The explanation for this is quite straightforward"—
he is talking about statistics which show what proportion of subsidies go to poor households—
Although pensioner households do not pay very much income tax, they consist in the main of one or two person households and therefore receive a proportionately smaller amount of subsidies than the three or four person households which make up the bulk of the middle income groups.
Pensioners do better than any other group in the community, and I am referring to pensioners living on the State pension or on supplementary benefits.
But there is another question which the Opposition are reluctant to answer. What alternative ways can they produce to protect the more vulnerable groups in our society—pensioners and poor families—from inflation? I quote what they constantly urge. They say that the benefits should be what they call discriminatory, by which they mean means-tested. Again and again the House has had evidence of how low is the take up of means-tested benefits. The Conservative administration brought in the means-tested butter subsidy—the social butter scheme. The take-up as we know, even after considerable advertising, was about two-thirds, and many of my hon. Friends will know that the scheme was resented because it named the poor. That is why we refuse to limit the social beef scheme to supplementary benefit pensioners and insist that it must go to all pensioners alike.
But there is another instance, and it is one that it is fair to mention to the House.


It is the instance of the United States food coupon scheme which was introduced to ensure an adequate diet for the needy—I use the term used by the Federal Government. It costs $4 billion in the present financial year, and is therefore broadly comparable to our own food subsidies scheme.
According to a survey by the Food Action Centre of New York—and as far as I know this has not been challenged by the Federal Government—out of 37 million people who are eligible, only 15 million, or rather less than 40 per cent., take advantage of the scheme. It is criticised for stigmatising the poor, the elderly, the unemployed and the black. It is much closer to what the Opposition would like to see in this country than the food subsidy scheme brought in by the present Government.

Mr. James Dempsey: My right hon. Friend made an interesting statement. She said that two-thirds of those eligible are taking advantage of the butter scheme. What I did not hear her say was what proportion of those eligible take advantage of the beef scheme. I should like that information, because I want to discover whether having to pay 20p to obtain the benefit of the coupon is having a deterrent effect by making old people decide not to take advantage of the scheme.

Mrs. Williams: My hon. Friend will appreciate that it is too early to have adequate figures for the beef scheme, but we shall give them to him as soon as we are able to do so. The response from pensioners' organisations leads us to believe that because the scheme covers all pensioners it is much more acceptable than the butter scheme, which distinguished between supplementary benefit pensioners and other retired people.
I now turn to the other example of means-tested benefit brought in by the Conservative administration. I am referring to the private rent allowance under the Housing Finance Act 1972 for unfurnished tenants, which was extended to furnished tenants in 1973. The House will know that unfurnished tenants are among the poorest people in the community and are far poorer than either owner-occupiers or the average council house tenant. However, of the 600,000 people eligible for

private unfurnished rent allowances, so far only 130,000 have claimed the allowance. That comes to a take-up of between 20 and 25 per cent.
There is, in practice, no way round the argument that virtually any form of means-tested benefit—a discriminating subsidy, if one likes to call it that—does not go to many of those whom it is intended to reach and is much resented by those whom it is intended to help.
There is one final argument about it, and it is the most final argument of all. Every means-tested benefit deepens the poverty trap. It makes it more and more unproductive for a man or woman to earn more, to get a better job, to do overtime or in any other way to improve his or her circumstances. In recent years, means-tested benefits have dug the poverty trap so deep that many people in the £25 to £40 band find they lose more in means-tested benefits than they gain if they increase their income by even £1.

Mr. Richard Wainwright: The right hon. Lady began with a catalogue of possible alternative social security benefits for the future. Will she say something about the possibility of legislating for statutory minimum weekly earnings?

Mrs. Williams: I recognise that the hon. Gentleman and his party take an interest in that subject. He will appreciate that it is a matter that comes within the sphere of another Minister. I hope that the hon. Gentleman will pursue it with the Minister concerned.
The third argument—it is the one that is most frequently used by the Opposition—is that subsidies are indiscriminate. I am bound to say that it does not lie in the mouth of the Conservative Party to talk about indiscriminate subsidies. The last Conservative Government introduced a massive programme of subsidies for nationalised industry products. When we came to office those subsidies were running at £800 million a year and were due to rise to £1,200 million a year for the current year. But—and this is not a point that has been made to the House before—the truth is that when they introduced those subsidies and allowed them to rise to figures twice that of the food subsidy programme they made no attempt to ensure that they benefited the less well off.
We have carried out a study of the effect of subsidies on the domestic prices of nationalised industry products over the period of the last Conservative administration. It has been a study of the effect of subsidies on only domestic supplies—for example, domestic coal, domestic electricity and domestic gas. If we included industry the figure would be much more telling. The effect of the subsidies was to redistribute two to one in favour of higher income groups. I am referring to the subsidies to electricity, gas, transport and the Post Office. In no case was any effort made of the kind that my right hon. Friend the Secretary of State for Energy is now making to alter price structures so as to benefit the small and the poor consumer.
The subsidies of the last Conservative Government benefited the better off, the over £60 households, to the extent of two times over the benefit derived by the less-well-off households. What an astonishing course of redistribution through subsidy. If ever there was an indiscriminate subsidy, it was the sort of subsidy introduced by the last Conservative administration.
More than that, it may be within the recollection of the House that during the last election the Conservative Party, in the person of the right hon. Member for Finchley (Mrs. Thatcher), came forward with another indiscriminate subsidy namely, the proposal to spend £180 million in pegging owner-occupied mortgage rates at 9½ per cent. while withdrawing the subsidy from council house tenants. I quote the right hon. Lady's own phrase:
To reduce the mortgage rate from 11 per cent. to 9½ per cent. would cost over £180 million per annum. This is the sum that must be set against the funds now going to municipalisation and the new large annual subsidies for new council houses to rent.
In short, the right hon. Lady was not attacking subsidies. She was certainly not attacking indiscriminate subsidies. She was merely suggesting that a subsidy for the middle income groups would be a good idea instead of a subsidy for the less well off.
As I have already pointed out, we have succeeded to some extent in mitigating the effect of the rise of the food index through food subsidies as against the position in 1973. I wish that we

had been able to do much more, but at least we have done something. Above all, we have done something in respect of pensions. The pensioner index—that is the index of goods bought by pensioners and weighted for their budgets—has risen by 13 per cent. That is only two-thirds of the overall rise in prices. That, too, was what we intended by our programme of subsidy and rent control.
I now quote from the low pay unit study that was undertaken by the Child Poverty Action Group. Some of my right hon. and hon. Friends may have seen the study. It says:
The cost of living of the poorest 5 per cent. has risen considerably faster than the average … while that of the richest 5 per cent. has risen somewhat slower.
It is referring to the period from 1970 to the present time. It continues:
This has been an accelerating trend. Our estimates suggest that the gap between the richest and the poorest in terms of cost of living increases widened to nearly 3½ per cent. since 1970 while the gap which opened in the period between 1964–1970"—
that was the period of the last Labour Government—
was only just over 1½ per cent.
That indicates that the gap widened more than twice as fast. The study then reads:
During most of 1974, however, the gap began to close again and this may be attributed to the maintenance of food subsidies and rent controls. Since last January"—
that is January 1974—
the prices of food and housing have risen somewhat slower than those of non-essential goods with the result that, despite the unabated acceleration of fuel bills, the advantage is being pushed back towards lower income groups.
I am authorised today to quote the Child Poverty Action Group. It has said to me that it has changed its attitude to food subsidies because of the findings of the study that it carried out. It earlier took the view that the money spent on food subsidies was not an effective way of helping the poorer groups in our society. The CPAG now believes that the subsidies have a valuable rôle until such time as an adequate system of family support for low income groups can be introduced. I say "amen" to that.
I commend the Bill to the House on the following grounds. First, it discriminates, Secondly, it assists the poor. Third, and


above all, it is an effective way of trying to mitigate the effects of inflation upon those whom the House, and above all, my party is committed to assist—namely, the most vulnerable, the poorest, the oldest and the weakest in our society.

4.46 p.m.

Mr. Timothy Raison: I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:
this House, believing that indiscriminate food subsidies have proved an extravagant way of helping those in need, are liable to create distortions and shortages, and conceal rather than deal with inflation, declines to give a Second Reading to a Bill which fails sufficiently to secure their progressive reduction.
We are today talking about an important Bill. This is, therefore, an important debate. We are talking about the possibility of spending an additional £1,000 million of public money. In effect, £500 million will be spent over the coming year and £500 million more from April 1975. This allows for the continuance of subsidies at at least their present level in money terms.
We have today the White Paper on public expenditure. We have not had the advantage that the Government have had of having time to peruse it. However, it is clear that in money terms the present rate of expenditure will be maintained. As subsidies are not fixed to a particular' year, it is difficult to say exactly how much can be spent in a year, but the Bill would allow up to about £120 million extra over the coming year assuming that the present rate of spending of some £580 million is maintained.
For the year from April 1976 there will be £500 million plus whatever is left over, which at the present rate of subsidy will again be about £120 million. In theory the subsidy could go up in money terms by some £40 million in 1976–77. I recognise that in real terms it may be less. It is difficult to argue the matter in full at this point. I am saying that there is nothing in the Bill which indicates that over the next two years a serious attempt will be made on the part of the Government to cut the rate of food subsidies.

Mr. Mike Thomas: Will the hon. Gentleman

tell us the level of expenditure on indiscriminate nationalised industry subsidies in the last full year of the Conservative Government and what it would have increased by in the next financial year?

Mr. Raison: That is an irrelevant remark. The Secretary of State has said in the House today that she does not want subsidies to be a permanent part of the scene. She said on 11th November:
I have always made it clear that in the long run our hope is that we might be able to phase out subsidies in the interests of other kinds of social expenditure."—[Official Report, 11th November 1974; Vol. 881, c. 8.]
Last night the House gave some hints about other kinds of social expenditure, and the right hon. Lady has confirmed today what she said earlier. We share those views, but we go further. We believe that now is the time to start the process of phasing out or, as the amendment puts it, "secure their progressive reduction." We have tabled a reasoned amendment, and I propose to try to argue a reasoned case.
It is a case which I suspect the Secretary of State to a great extent accepts. There was a very odd feature about her speech today. She spent a great deal of time arguing the merits of subsidies and yet she still affirms her desire to get rid of them. The more she went on arguing the merits of subsidies the more I wondered why she has affirmed her desire to get rid of them. We believe that they should disappear gradually over the course of the next few months.
During the course of her speech the Secretary of State, not surprisingly, referred to the position of the Conservative Party. It is true that we did not vote against the last Prices Act, and it is true that we said in our manifesto in October that it would be necessary to retain these subsidies "for the time being". The Secretary of State kindly gave a gloss on that when she said that we were thinking in terms of a year or so. I should add that we stressed the ineffectiveness of subsidies as a means of concentrating help on the poor. I will confirm that we do not wish to see them removed overnight and that a year or so is a reasonable assessment.
We take this view for several reasons. First, the House will remember that last


April, when the Prices Bill was introduced, the newly elected Government had come in with a particular policy. They did not get much support from the electorate but it was enough to come into power. They had a policy to deal with prices. We felt that in the immediate wake of the election it would be wrong to go all-out to defeat the Government. I do not think that was discreditable on our part. We made it clear how dubious we were about the merits of the policy but at least we gave the Government a chance to try it out.
Secondly, and this is most important, the economic picture was different from the picture today. We were in a period when our great concern was with the rate of price increases. Goodness knows, we are still concerned about that today, but what has happened since then has been that the rate of wage increases has overtaken the rate of price increases. There is a quite different situation.
Thirdly, by the time of the autumn election we had got into the position which had always been prophesied by opponents of subsidies. Opponents have always said that subsidies are hard to get out of because expectations are aroused and it is difficult to dash them overnight. This has always been—and we can go back to the 1950s for this argument—one of the strongest objections to the use of food subsidies.
We believe that the time has come for a planned rundown. There are several reasons for this. The first is that the theoretical objections to them, which have been held for a long time—their wastefulness, their liability to distort, the increase in bureaucracy they entail, are being borne out in practice. Secondly, we have a different situation from that of last summer. In particular, we have had the dramatic shock of the Chancellor's autumn Budget, when he revealed this enormous, soaring increase in the public borrowing requirement, from £3,000 million or so to well over £6,000 million. That is a factor of crucial importance.

Mr. Dan Jones: Would the hon. Gentleman not agree that those borrowing powers, which were extravagantly large, were due mainly to the rise in the price of oil?

Mr. Raison: No. There were a lot of factors which came into the story. Whatever the reason for the need to borrow money, the fact remains that the Government have embarked on a policy which needlessly adds to that borrowing requirement.
Thirdly, incomes have outstripped prices. It is true that many people today, because of the rate of increase in their real earnings, do not need subsidies to maintain their standard of living. This does not apply to all people, because, as the House is aware, it is an important part of our case that there are better ways of helping the community than those proposed by the Secretary of State.
I can further argue that subsidies may help to conceal from people the fact that the Government are shirking part of what is absolutely necessary if we are to beat inflation; namely, the attempt to match living standards to real wealth. There is one particular danger about subsidies at this time, of which we saw a hint in the latest bread subsidy. It is that subsidies might be used directly to pay for wage increases.
It would be absolutely disastrous if that were to happen. I know that the Secretary of State, in announcing the latest bread subsidy, made the point that it is to be only an interim subsidy. At the least we are entitled to ask the Minister of State, when he replies, to explain just what is meant by an interim subsidy. How long is it expected to last? We are entitled to an absolute confirmation that it is not the Government's policy to use a subsidy to pay for wage increases.
Perhaps we should be grateful that so far nothing has been done to meet another commitment of the Labour Party which was derived from the TUC-Labour Party document on which the social contract is based, "Economic Policy and the Cost of Living", which said that special measures would be taken to deal with increases in the prices of, among other things, sugar and potatoes. We do not seem to have seen many signs of those special measures. I am not grumbling about that. I would like to know, how-over, what is the position about that statement.
Let me go through, in a little more detail, some of the arguments for a planned programme of reduction of subsidy. First—and this is inescapable in spite of what the right hon. Lady has said—subsidies do not help those who are most in need of help. It is now agreed that they do not go more particularly to those who are in need than to the population as a whole. I do not think that the House was impressed by the torrent of argument we had from the Secretary of State on this subject this afternoon.
Perhaps I can take up the Secretary of State about the way in which she referred to an article by Christopher Ritson in New Society of 23rd January. She seemed give a misleading impression of what he was saying, not that just one middle-income group, to which she referred, was benefiting from subsidies, but also the middle-income group above the one to which she referred; namely the £41 to £70 a week group. The right hon. Lady might have said that. The position was made clear by the Under-Secretary in his answer to a Written Question tabled by my hon. Friend the Member for Eastbourne (Mr. Gow) on 19th November, when the hon. Gentleman said:
The estimated cost of food subsidies in the current financial year is £500 million. On the basis of patterns of consumption recorded in the 1973 Family Expenditure Survey—the latest available—it is estimated that about 33 per cent of this expenditure will be received by households with an income of less than £40 per week, which contains about 32 per cent of the population. About 52 per cent. of the expenditure will be received by households with an income above £50 per week, containing about 52 per cent. of the population."—[Official Report, 19th November 1974; Vol. 881, c. 403.]
I am not denying that there is something in what the Secretary of State said about the distinction between households and individuals. I accept that that is a valid part of the argument. But if we look at those figures there can be no doubt that it is still true that a great deal of help is going to families, households, individuals—whatever they are called—who, frankly, are not in need.
The Secretary of State has argued on several occasions that food subsidies are redistributive because they come out of direct taxation. On 16th December she said:

The changes in direct taxation introduced by the present Government are ensuring that the cost of food subsidies programme is borne by households with incomes of over £50 per week.… The additional taxation on those earning more than £60 a week is greater than the benefit from subsidy."—[Official Report, 16th December 1974; Vol. 883, c. 1095.]
The right hon. Lady reiterated this kind of argument today. She was being a little less than her usual scrupulous self. In his Budget speech last March the Chancellor of the Exchequer stated quite explicitly that subsidies would be paid for by wide-ranging increases in indirect taxation. He said:
I deal first with indirect taxation. Here my aim is to help pay the cost of reducing the price of the more essential goods by increasing the tax on the less essential.
The Chancellor then illustrated the changes in indirect taxation that would be necessary for this purpose. He announced his intention to extend VAT to soft drinks, confectionery, potato crisps and ice-cream, to apply the standard rate of VAT to petrol and other road fuels, and to impose increased duties on spirits, beer, wine, tobacco and off-course betting.
Summing up the proposals, the Chancellor said:
The total yield in a full year from all the changes in indirect taxation I estimate at £680 million.… This goes a long way to cover the demand effects of the increases in food subsidies and represents a shift of price from essential to less essential goods which I hope the House will approve."—[Official Report, 26th March 1974; Vol. 871, c. 308–11.]
Since the election the Chancellor has confirmed that food subsidies are paid for by indirect taxation. On the Thames Television programme "People and Politics" on 26th September he said:
I had to increase in my opinion, excise duties … in order to find the money to subsidise basic food stuffs.
These higher indirect taxes do not fall exclusively on the rich. As the Chancellor said in his March Budget speech:
the proposals I have already announced in the field of indirect taxation will bear on people at all income levels."—[Official Report, 26th March 1974; Vol. 871, c. 321.]
I accept that in the July Budget the VAT was cut, but the extent of the cut was only £140 million in the current year. It is not worthy of the Secretary of State to argue that the money is all coming out of direct taxation when we have such conclusive evidence from the Chancellor of the Exchequer that he was


thinking in terms of raising the money through indirect taxation.
If my hon. Friends the Members for Oswestry (Mr. Biffen) and Cirencester and Tewkesbury (Mr. Ridley) were here—I am sad that they are engaged on the Finance Bill—I have no doubt that one or other, or probably both, would rise at this point to make a statement which commands a great deal of truth, to the effect that the subsidies are financed out of neither direct nor indirect taxation but out of the public borrowing requirement. We cannot get away from that.
In Questions to the Chancellor this afternoon we heard a lot about the public borrowing requirement. Whenever the Opposition suggest an increase in spending—as we did last night, with the help of some worthy hon. Gentlemen on the Government side—the Government say that the public borrowing requirement will have to be increased. Why does not the same argument apply to food subsidies?
The Government seem to be taking a different line on nationalised industry price subsidies. As the Chancellor in his November Budget speech said on nationalised industry subsides in compensation for price restraint:
I have set it as my objective to phase out these subsidies completely as fast as possible."—[Official Report, 12th November 1974; Vol. 881, c. 268.]
Why, we ask, is the same principle not being applied to food subsidies? Hon. Members on both sides of the House know that much more concern is expressed to them by old people and poor people in their constituencies when the coal and electricity bills shoot up than when the food bill shoots up.

Mr. Mike Thomas: As I introduced the nationalised industries argument earlier, will the hon. Gentleman have the courtesy, as I did, to acknowledge that it is relevant?

Mr. Raison: The hon. Gentleman wants me to talk about the Conservative Government's policy on nationalised industry prices. We were engaged, as are the Labour Government, in a desperate attempt to try to contain inflation. It is arguable whether the policy we adopted did not go too far. I am not concerned to defend it. These are difficult matters. What we are talking about now is the right thing to do in face of the present

economic situation. I believe that the right thing to do is to run down food subsidies over the next year or so.
For the sake of argument, let us suppose that we can afford this next £1,000 million—or at least this extra £500 million which the Government propose to add immediately to the bill. Does anyone seriously suppose that there are not many better ways of using it than on the political battle of trying to keep the index of retail prices down by 1½ per cent.? The House last night gave a strong indication of one way in which it would rather see that money used. The Chancellor of the Exchequer made a great song and dance about where the money would come from. We can tell him quite simply this afternoon. The food subsidy bill would be one way of finding it. We all have our own ideas, and I shall not go through a list of the different ways in which the money would be better spent to help the people in need.

Mr. Dan Jones: I wish the hon. Gentleman would.

Mr. Raison: I can give one or two. I represent a constituency in Bucking-hampshire which is acutely hard pressed by the cost of the education service we provide and is faced with the prospect of the rates soaring again this year by about 40 per cent. I am interested in education and believe that one way in which the money would be better spent is by helping out the school programme. That is my personal view, but I am interested in several other subjects—for example, the state of the social services and the hospital service. Can anybody deny that there is a desperate need for more money there, and that the money would be better used in that way rather than in this profligate form of public expenditure which we are discussing? I do the hon. Member for Burnley (Mr. Jones) the credit of thinking that he knows in his heart that my argument is right. If the money is available—and that is questionable—it could be spent to far greater effect.
I come to my argument that subsidies tend to distort. The Chancellor of the Exchequer said:
If we are to correct the large structural distortions which have affected our economy over recent years, with too much going into consumption and too little into investment and exports, it is inevitable that from time to time steps should be taken which will raise


consumer prices."—[Official Report, 12th November 1974; Vol. 881, c. 279.]
The Chancellor was right. We believe that that must apply to food subsidies.
There is a distortion of demand, and it is particularly evident on the dairy side. It is clear that the milk subsidy has stimulated demand and that this in turn has led to a shortage of British dairy products, especially cheese. We have had to import more cheese and more butter, and over the Christmas period we had to do something which is very unusual—import cream. In the Financial Times of 24th January there is an estimate by the dairy industry that the consumer subsidy on milk will mean that an extra 50 million gallons will be drunk, leaving 50 million gallons less for dairy products.
As the Financial Times also argued on 24th January, there are beginning to be signs that the subsidy may help to stimulate the demand for tea. After a period of decline, the demand for tea has been picking up, and there is a fear that if demand is stimulated it will help to put up the price at which we have to buy the commodity from abroad.
Let me fill in the picture of the distorting effects of subsidies more fully and take another example—bread. The consumption of bread in the first nine months of 1974 compared with the same period in 1973 showed an increase of 1·8 per cent. according to the National Food Survey. That is a significant increase, particularly as the consumption of bread had been declining. There was a drop of more than 12 per cent. between 1968 and 1973 in the demand for the large white sliced loaf, which, mysteriously to me, is the most popular with the public as a whole. There was an increase in the first nine months of 1974 of 11 per cent. It is quite clear that food subsidies are having an effect on demand, and if that is carried far enough it can eventually lead to shortages.
To go back to the dairy position, one big food retailer's estimate, confirmed by independent research, of the increase in the national consumption of butter over recent months is 14 per cent. The National Food Survey showed that in the third quarter of 1974 the increase was 7 per cent. For margarine the National Food Survey shows a 10 per cent. decline in the third quarter, while

current estimates indicate a decline of over 20 per cent. Some may say that the swing between margarine and butter does no harm, but it means that the cheaper product which has been relied on by many poor people is proportionately less cheap. There is no subsidy on margarine.
More importantly, there has been a substantial increase in butter imports. The import of butter in October 1973 was 18·2 thousand tons; in October 1974 37·2 thousand tons; in November 1973 19·9 thousand tons; in November 1974 32·2 thousand tons. There has been a dramatic increase in the amount of butter that we have had to bring in from abroad. The production of home-produced butter has declined substantially.
In addition to these distortions there is—as it has always been known there would be—endless bureaucracy and endless paper work, though perhaps I should add with some degree of gratitude our pleasure at the fact that the campaign led by my hon. Friend the Member for Gloucester (Mrs. Oppenheim) to get rid of many of the absurd maximum price notices has met with some success.
I was disappointed to hear from the Secretary of State this afternoon that the campaign has met with less success than we had hoped and that maximum prices are still to be applied to some products. If the Bill gets into Committee it is a point which we are likely to pursue. We have had some success, and perhaps that says something for the efficacy of parliamentary Prayer. I suggest that the right hon. Lady drops the cheese order which awaits discussion and against which we have also prayed. I am sure that her hon. Friend the Under-Secretary would be grateful if she took that step.
The logical case against continuing the food subsidies at their present level is formidable. However, we must look at the matter not only from the 'standpoint of logic but as a matter of politics. We believe that, by fudging the issue and adding to public spending, subsidies help to create an illusion that things are not as bad as they really are. That illusion was carefully fostered in the pre-election days by the Secretary of State for Prices and Consumer Protection, by the Chancellor of the Exchequer and, inevitably, by the Prime Minister. At times we detect a little more honesty on the part of the Government in the post-election world.
On the other hand, the Government's overall policy for prices and incomes still rests on one grand illusion—namely, that of the social contract. The reason why we have the present Bill before us is very much more to do with the social contract than with anything else. A voluntary incomes policy, in my view, would be far more likely to succeed if it proceeded through honesty rather than through bluff. It would be far more likely to succeed if all sides of industry, the consumers, and even Parliament were allowed to have some say in the social contract rather than that this should be arrived at via a private deal between the Labour Party and the trade union movement. An honest policy would answer the question: "Why spend another £1,000 million on reducing the cost of living for people who, in many cases, are receiving increased incomes in real terms when the country cannot afford it." Why not use such money to meet real needs?
We shall press our amendment to a Division, and in Committee—if the Bill gets a Second Reading—we shall put forward our ideas about how subsidies can be progressively phased out.
We accept—as we always have done—that it is not possible to wipe the whole lot out with one blow, but we want to aim at this happening over the next year or so. We are strongly opposed to the clause which says that the level could be raised by order rather than by an Act of Parliament from £1,200 million to £1,700 million from 1st April next year.
By supporting this reasoned amendment, the House has a chance to restore some sanity to one area of our beleaguered economy.

5.25 p.m.

Mr. Dan Jones: It must be agreed immediately that no responsible man or woman, and certainly no Member of this House, would want subsidies as of choice. Personally, I would dearly like to see an end of these subsidies. But, at the same time, for Conservative Members to talk about subsidies as though they were some kind of economic innovation imposed by a Government just for the hell of it is too pathetic for words. I hope in my remarks to show quite clearly how the Conservative Party and its leaders have made subsidies an absolute necessity—and, say what we may

about them, subsidies will go on for some years to come.
Having said that in opening I believe it is incumbent upon me to offer substantial evidence to prove that point—and I think that I can prove it. It is always characteristic of members of the Conservative Party that whenever they mention food subsidies and the necessity for reducing them, they talk as though the cause of our difficulties lies always with one section of society and in the wage increases paid to people who work in industry. That argument is trotted out regularly by Conservatives. On that controversial issue there is nobody on the Conservative benches who has done as much as I have to restrain wages in industry—[Interruption.] Conservatives may laugh, but they have not the moral courage to go out on the factory floor and talk as they do in this House.
When the document "In Place of Strife" was brought out in 1968, I was in the forefront of the arguments that continued until late in 1969—and I am sponsored in this House by a trade union. If that is not an example of moral courage, I do not know what is. How many Conservatives, on an issue as acutely vexatious as this one, have taken similar action? I do not want to pursue that matter, but simply say that I went through hell in my constituency and with my own trade union. I believe that there must be this form of restraint, and that it is inevitable, but at the same time I believe that it is only one part of the contribution and not necessarily the most important part.
The surprising allegation has been made by Conservative spokesmen—they include the hon. Member for Aylesbury (Mr. Raison) and his right hon. Friend the Leader of the Opposition—that the social contract is an agreement between the trade unions and the Government.

Mr. Raison: indicated assent.

Mr. Jones: I notice the hon. Gentleman agrees with me. I do not know whether he wants a lesson in reading to get the facts straight, but all responsible newspapers, including possibly the most responsible of all, The Times, have made copious references to the various discussions which have taken place on this topic—and even within the last fortnight


the CBI, the TUC and the Prime Minister have had a long session at No. 10.

Mr. Raison: Does the hon. Gentleman not think it a tiny bit odd that if one wants to read the social contract, one does not go to the Vote Office and ask for the publication but writes to Transport House to ask for a copy?

Mr. Jones: That is where the hon. Gentleman's lack of imagination shows—[Interruption.] Conservatives seem to think that that is a source of merriment. Of what value is any contract if exclusively organised by the CBI? The most important part affects the TUC. That may be a matter of opinion, but it is the view I take. Any agreement with industry which does not include the trade unions is valueless. One has to deal first with the people principally involved. Surely I do not need to persuade the Opposition who are the people mainly involved in the social contract. That is my contention, and I say it quite definitely.
I should like to draw attention to one observation made by my right hon. Friend the Secretary of State in introducing the Bill. Did she not say that the cost of living in the period up to this year would have tended to decrease had it not been for the tremendous increases in fuel costs? I think that she did. If I am wrong, I shall give way to my right hon. Friend. I definitely understood her to say that. I want to come to the question of fuel later. I should like to think that my facts are reasonably accurate, so I shall repeat that had it not been for excessive increases in the cost of fuel the cost of living factor would have tended to stabilise or even to show a slight decrease.

Mrs. Shirley Williams: I was quoting from the low-pay study by the Child Poverty Action Group, which stated that even with the increase in fuel bills, food subsidies and the rent freeze had brought down the relative cost of living for the low-paid. Obviously it would have gone even further down if fuel costs had not been increased.

Mr. Jones: That is the point. I do not think that we want to go into minute details.
On fuel costs, I should like to draw the attention of the House to an article in The Times of 28th January. I want to

engage the attention of the Opposition Front Bench who are now engaged in a private sub-committee meeting. After all, we listened to them and they are expected to listen to us.

Mr. Deputy Speaker (Sir Myer Galpern): Order. I hope that the hon. Gentleman will address himself to the Chair. I am listening patiently all the time.

Mr. Jones: It may be that you, Mr. Deputy Speaker, do not need to be convinced, but they do.

Mr. Deputy Speaker: Order. The Chair does not need to be convinced of anything. It is impartial in listening to both sides as they deliver their addresses.

Mr. Jones: Certainly. If I have in any way offended you, Mr. Deputy Speaker, I apologise.

Mr. Deputy Speaker: I am not in any way implying that the hon. Member has offended me. I am simply pointing out that if he addresses me he will not notice the Opposition Front Bench and will get on with his speech.

Mr. Jones: All right, Mr. Deputy Speaker, I will proceed.
I had reached the point—I should at least like the Opposition Front Bench to listen—where I was about to refer to a statement regarding fuel oil. In The Times of 28th January there is one of the most remarkable statements relative to the cost of living that I have had the displeasure of reading in many years. It is written by Sir John Foster, whom I remember over many years in this House as an estimable parliamentarian. He has written to The Times supporting the nomination of the right hon. Member for Sidcup (Mr. Heath) for the position of Leader of the Opposition in the ballot which is to take place. I shall not be greatly daring by interfering in any way with the election that is about to take place. Indeed, I hope that the best man wins, even if the best man happens to be a woman. However, I think that the Opposition must take seriously—I do, at any rate—the observations made by Sir John Foster. As this will be a lengthy quotation, I shall resume my seat


immediately I have made it. Sir John Foster writes:
I hope also that when he is elected"—
he is recommending the right hon. Gentleman for—

Mr. Deputy Speaker: Order. Is this lengthy quotation from Sir John Foster dealing exclusively with the election of the Leader of the Opposition?

Mr. Jones: No, it is not.

Mr. Deputy Speaker: I hope not, because it would be strictly out of order.

Mr. Jones: With respect, I think that this letter deals exclusively with fuel and fuel costs. I have already intimated to the Chair that I believe that fuel costs are instrumental in the increase in the cost of living that we are now enduring.

Mr. Deputy Speaker: That is quite in order.

Mr. Jones: I think that I have made that point, so, with your permission, Mr. Deputy Speaker, I shall proceed.
Sir John Foster says:
I hope also that when he is elected his supporters will warn him that he only has their support for a year if he does certain things. The first and most important being that he must listen—not necessarily take other people's advice, but listen and consider it, make inquiries, ask comparative opinions. I quote here from a memorandum"—

Mr. Ian Gow: On a point of order, Mr. Deputy Speaker. Is it in order, on the Second Reading of the Prices Bill, to quote from a letter by Sir John Foster about the forthcoming election for the leadership of the Tory Party?

Mr. Deputy Speaker: The hon. Gentleman would know, if he were present, that I raised the question whether what we were about to hear was in order. This is merely the preamble to the question of the effect of fuel prices on the cost of living. I dare say that the hon. Member for Burnley (Mr. Jones) will come to it in due course.

Mr. Jones: You may rest assured of that, Mr. Deputy Speaker. I assure hon. Gentlemen opposite that before seeking to quote this letter I took constitutional advice in this Chamber on whether it was

in order. I am assured that such is the case. If hon. Gentlemen opposite attach the importance to this debate that it deserves they might at any rate listen to what this esteemed parliamentarian has to say about fuel prices. I think that should be done, so I will continue.
I quote here from a memorandum I wrote on oil prices in December 1971. Notice the date. Two years before the crisis in oil pricing broke out I pointed out that the OPEC countries would raise the price of oil against us.
I made a Kissinger-like suggestion, long before Kissinger, that the consuming governments should band together in a united front to stand up to the oil producers while the oil companies took a position behind the western governments.
The third point I made was that Her Majesty's Government should spend lavishly in searching for new sources of oil and further productive sources of fuel.
Here are the relevant extracts of the memorandum I sent to Mr. Heath, copy to the Think Tank, in December 1971.
'Inevitably the OPEC countries will raise the price of oil consumed by the Western world. At the moment, even with the temporary glut of oil and the tremendous fall in tanker rates, the consuming countries are inordinately dependent on OPEC sources and especially on the Middle East, including Iran. In my view the oil companies are too weak to stand up to the producing countries, who are the real negotiating parties. In any case the extra price is passed on to the consumer and the oil companies have no overriding interest to stop the escalation. It is therefore necessary, I think, to put the governments in the front rank.
'There should be an intimate relationship between consuming governments to constitute a united front to the OPEC countries. The western governments have more cards to play than the oil companies—alliances, armament deliveries, protection against enemies, etc. The impression given by those oilmen who do not negotiate with OPEC is that the oil negotiators do not have the stature, the will or the means to stand up to the pressure of the OPEC countries.
'In my opinion the western governments should be in the front line—certainly in the case of their opponents the governments are the prime movers. If the governments do come to the front in the oil negotiations care must be taken that the oil situation should primarily be taken into account in co-ordinating Her Majesty's Government's policy.
'In negotiations the interest of the United Kingdom in preserving our oil supplies must be paramount and subordinated to political advantage, especially if this political advantage turns out to be nugatory. The other conclusion to be drawn from the OPEC threat is that Her Majesty's Government should incur lavish expenditure in finding alternative sources of supply and alternative sources of energy.'"—

Mr. Deputy Speaker: Order. I think that the hon. Member will agree that we have listened patiently. He has made the point about the effect of the increased cost of fuel. He is now going on to deal with the question of fuel. This is a debate on food subsidies, not on fuel. I regret to say that nine-tenths of what he has said has been out of order.

Mr. Jones: If you rule me out of order, Mr. Deputy Speaker, of course that is the end of the matter, but I began by saying, and I persist in saying now, that the food subsidies are related to the cost of living—and who can deny that oil has a substantial effect on the cost of living?

Mr. Deputy Speaker: That is absolutely in order.

Mr. Jones: Then I shall proceed for a minute or two longer. I take this subject very seriously, and when I make my speech I do not give a damn what the reaction is. I wish that Conservative Members would devote similar attention to it. The quotation goes on:
'The other conclusion to be drawn from the OPEC threat is that Her Majesty's Government should incur lavish expenditure in finding alternative sources of supply and alternative sources of energy. This is a technical field of which I have no knowledge—whether coal, solar energy, nuclear energy should be encouraged. It would seem common sense to offer the most generous terms to encourage North Sea exploration and production and also on United Kingdom land. It may be that Shell and BP would welcome Government money for exploration elsewhere.'
I was sent a message that my memorandum was unfounded. I did not ask Mr. Heath to believe me but to check with the Foreign Office, intelligence sources, Arabists, the oil companies, etc., when he would have found out that the situation already then in 1971 was very serious indeed.
Whether the Chair agrees with me is a matter for the Chair, but I am convinced, when our friends talk so glibly about subsidies for food being closely allied to the cost of living, that, whatever we do, while oi' prices are soaring we shall be faced with food subsidies.
This is a message not only for the Leader of the Opposition, who neglected it. If he had acted on that message, he might have prevented the astronomical increase in oil prices, with the result that the cost of living would have been far lower and the need for subsidies equally

lower—[Interruption.] Do the Opposition think that there is something to laugh at in that? I believe that even now there is a message in that statement for the present Prime Minister.
My own humble recommendation is that at this moment we should be taking Kissinger's advice, that there should be a stand against the Arab countries on the question of oil. If we fail to do that, we can do what we like internally but we shall face subsidies from now until we do it, and do it effectively.

5.44 p.m.

Mr. Richard Wainwright: The lilting bravura of the hon. Member for Burnley (Mr. Jones) in his magnificent series of concluding remarks accentuates, unfortunately, the sadly low-key speech of the Secretary of State. Gone is her gaiety of last spring and summer, when she cheered us on to assault the peaks of inflation—the temporary peaks of inflation as she once described them—with short, sharp subsidies. Today we heard a very defensive speech—a negative speech, and one which ended on a very cruel note, harassing the Conservative Opposition with the shambles that they are well known to have made of their opposition to food subsidies—opposition on a Monday and Thursday, very lukewarm support on Tuesdays and Wednesdays, with the weekends optional. The right hon. Lady's attacks on the Tory Party were quite out of character for a member of a Government pledged to introduce a measure banning cruelty to hares.
The right hon. Lady began with an attack, for which there is no authority, on Mr. Ritson's scholarly article in the current number of New Society. I can only think that to make an attack so devoid of foundation sprang from offence that Mr. Ritson may have given to the Government Front Bench by his reference to one of the attractions of food subsidies being their capacity to attract votes. On that, I entirely agree with Mr. Ritson. I congratulate the Labour Party on the skill with which they presented food subsidies as an undoubted political attraction.
But when the Secretary of State accused Mr. Ritson of saying that food subsidies had a bad effect on standards of nutrition, she was inventing something


which is nowhere to be found in his article. In a most scholarly article, the furthest he goes is to say:
It is difficult to make out a case for subsidising food prices on nutritional grounds.
That is a thousand miles from what the right hon. Lady alleged.
More serious than that—I shall not spend long on this point, because I agree entirely with the hon. Member for Aylesbury (Mr. Raison)—the Secretary of State performed an extremely amateur and ineffective conjuring trick by trying to lead the House to suppose that food subsidies are necessarily and logically paid for out of direct taxation. There is no warrant at all for such an assertion and she was unable to produce any evidence. We do not have appropriated revenues in this country, so one simply cannot point to a particular form of taxation and build an alleged argument on the idea that benefits are paid for by a particular tax. Certainly, to argue about who pays for subsidies without reference to the burden of VAT is to invite people to take part in a great game of magic.
At another point, the Secretary of State seemed almost to complain that, in respect of food, Government statistics deal mainly with households rather than individual mouths. That is not our fault. I do not see why the Secretary of State should suddenly take exception to the form of Government statistics which she is happy to use when they suit her case.
The reason that I found her speech and the Government's attitude on this matter particularly disappointing is that she was less than frank about the prospects of phasing out food subsidies. When, very temporarily as it turned out, inflationary pressure relaxed a little during last summer, the right hon. Lady, in some of her public pronouncements when the House was in recess, was almost euphoric about the chances of phasing but subsidies. On television on 9th August, she said:
As the prices of commodities begin to fall, we would seek to phase the subsidies out. The subsidies were meant to take the peaks off inflation.
Talking to Carolyne Morehead of The Times just before the last election she said

They will go on until eventually inflationary pressures move on to a plateau and then we will slowly phase them out.
But since then, the inflationary pressures have returned, and I have no doubt that one factor which contributed largely to the low-key and sad mood of the Secretary of State was the latest report, published last week, of the Price Commission. This draws attention in the most sombre terms to the mounting inflationary pressures. Decent candour requires that, faced with the return of inflationary pressures, before this debate is concluded this evening we should hear from the Government Front Bench just what their new strategy is in regard to the duration of food subsidies.
In any case, however long food subsidies are to last under the new strategy which has so far been shrouded from us, it is very important that the House should have some evidence that the Government are beginning to consider the enormously difficult task—perhaps this may be reserved for a future Government of another colour—of eventually changing gear from massive and extremely expensive food subsidies to more discriminating cash benefits.

Mr. Dan Jones: May I invite the spokesman for the Liberal Party to tell the House now whether he expects the inflationary tenancy to decrease while the price of oil will increase?

Mr. Wainwright: I am not prepared to pronounce on that. I do not regard myself as an authority, and I do not have the prophetic powers which may have been given to the hon. Gentleman. What I do say—I hope that I am in sympathy with him here—is that with devastating factors such as the present monopoly price of oil about in the world and menacing us, it is important that the Government should not go on wittering about what will happen when inflationary pressures cease but should be more realistic and say how long they intend to continue with these massive subsidies, assuming that inflationary pressures continue. We expect a degree of frankness with the House before the debate is concluded.
It is also important that we should be given some idea of how Whitehall, at any rate—even if Westminster and Downing


Street have no time for these matters—is preparing to change gear from this policy of subsidies to the more discriminating cash benefits, which the Government have from time to time said they look forward to substituting. It will be an enormous task. The impact of phasing out food susbidies on the family of the earner of a medium-sized wage who has three or four children will be very substantial. They are not the sort of people who will benefit from the substituted cash benefits.
I presume that this is still Government policy, because as recently as 12th November, in his second Budget Statement, the Chancellor used these memorable words:
the best way to help pensioners is to increase pensions."—[Official Report, 12th November 1974; Vol. 881, c. 255.]
I take it that it is legitimate to infer from those words that the Government also believe that the best way to help children is to increase family allowances, and I hope that the Government mean that the best way to help those who earn their poverty by working a normal week for intolerably low wages is to introduce some statutory minimum earnings level. We have heard nothing about that from the Government.
I want to enter a plea here—not for the first time—that when we have debates which concern virtually every home, and certainly every needy home in the country, Ministers should not put themselves in a position in which they can shelter behind the strict limits of their ministerial responsibility. During this debate we should hear from one of the other Secretaries of State who has some responsibility for the income side of people's household accounts; otherwise we are participating in a largely meaningless exercise.
I was disappointed when, in answer to my intervention, the Secretary of State, rather uncharacteristically for her, sheltered behind the strict limits of her ministerial responsibility. If we cannot discuss intelligently across the Floor of the House in a debate such as this the alternatives to food subsidies, we might almost as well go home and merely leave Conservative Members to move some amendment or other without daring to vote against the Bill.
I come briefly to the argument in which I profoundly believe—that on the whole

the evidence is overwhelming that the people who come out best from this improvised policy of vast subsidies on certain foods are the middle-income groups. Not a word that the Secretary of State said convinced me to the contrary. The typical middle-income family comes out best—without in any way seeking it. I make no accusations of greed. These people were not consulted. They did not petition the House to have their food subsidised. The people who come out best are those in receipt of rather more than average wages, who have a strong negotiating union behind them—good luck to them—and who have four or five children. They have a household of, say, seven mouths. That is seven beneficiaries from the food subsidies, but they make nothing like a full contribution in taxation to pay for them—unless they are extremely extravagant at the shops and pay an enormously above-average amount in VAT. This is not of their seeking, but this is what happens.
In order to sustain that argument, it is necessary to comment on the extraordinary amount of weight which the Secretary of State placed on a mere assertion from the Low Pay Unit. She did not quote the unit's evidence. She relied, to an extent which I find astonishing for a senior Cabinet Minister, on an assertion from this body—for which body I have a good deal of respect. She also made a mistake. She seemed to think that the Low Pay Unit and the Child Poverty Action Group were in some way one and the same thing. I hope that she will take it from me that that is just not so. There is one eminent authority who is connected with both, but the existence of the CPAG owes nothing to the Low Pay Unit.

Mr. Mike Thomas: The same director.

Mr. Raison: The same office.

Mr. Wainwright: Not the same office—if I may respond to the intervention of the hon. Member for Aylesbury. The Low Pay Unit is at No. 9 Poland Street; the other is in Macklin Street.

Mr. Mike Thomas: The same director.

Mr. Wainwright: Having cleared up that small but important matter, let me go on to say about the Low Pay Unit, on which the Secretary of State relies so much, that in spite of its excellent work,


in which I am happy to assist in a small way, from time to time, it is obsessed not with absolute poverty, which is the grim thing which concerns my right hon. and hon. Friends and myself, but with issues about differences between the material standards of the top-notchers, income-wise and the material standards of the lowest income groups. It is obsessed with the gap. The gap, however, is one of the least important things. What really matters is the absolute standard—which so urgently needs improvement—of the lower earners and the lower benefit people in our community. On that matter I do not believe that the Low Pay Unit has yet contributed anything of value about the effect of food subsidies.
So far—although there is still time—nothing has been said to show the efficacy of food subsidies, and taking account of inflation, on the Secretary of State's own admission, the redistributive effect is very modest, The right hon. Lady makes no claim that they have any great effect on the public standard of nutrition, but, worst of all, we have had no indication how this allegedly temporary policy of subsidies will lead on eventually to a sensible system of humane and properly administered benefits so that those who need them should be able to acquire them without serious trouble.
Unless we hear convincing arguments before the close of the debate my hon. Friends and I will not be content with any kind of half-and-half amendment, but will go into the Lobby, I hope with support from other hon. Members, to oppose the Second Reading.

6.0 p.m.

Mr. Mike Thomas: I intend to begin my speech on a non-contentious note and express a welcome, which I am sure is felt on all sides of the House, to Dr. Michael Young, who is to take over the rôle of director of the new National Consumers' Council. The council will be very much concerned with prices, food subsidies and the rôle of the consumer in the community, and I congratulate my right hon. Friend on a very good appointment.
I want to deal first with a series of small points that I raise on behalf of the co-operative movement, whose interests I have the privilege to represent in this House. I then want to move on to general

comments and thoughts about the Bill and the issues which surround it.
We in the co-operative movement support the Bill and its general intentions, but our reservations are related to the administrative details and the additional cost which it may give rise to without substantial benefit to consumers. On the question of the display of prices for subsidised foods, we accept that it is of great importance that the subsidy is seen to reach the consumer. We have been concerned all along that the subsidy should not disappear in the form of higher prices for producers or higher profits for distributors, and I know that concern is shared by my right hon. Friend the Secretary of State. We suggested to the Department that it might devise an advertisement which could be displayed in shops and which would meet the requirements of the Act.
I am not sure whether my right hon. Friend was moving towards that objective in her speech. I understand that in prior discussions the idea was turned down. We should be glad if she could look at it again in view of the burden it will impose on shop staffs when changes are made which in practical terms might involve a member of the staff searching in a drawer for a grubby piece of paper which might or might not be there—a search by an assistant who might go in only on Saturdays and not know where it is. I do not believe that it will provide an effective enforcement of the Act or the price regulation orders which my right hon. Friend introduces from time to time.
I do not think, either, that the bureaucratic notices, which look a little like those notices in some major public places of employment about the Offices, Shops and Railway Premises Act, are the answer. Surely, something more imaginative can be done on this front to give consumers the facts about prices and have their attention drawn to the range of products covered by subsidies and to the voluntary agreement with retailers on the keeping down of prices.
The second point I wish to raise on behalf of the co-operative movement is the general and vague reference in the Bill, which has not yet been explained, about the need for shopkeepers to keep records and the taking of powers to enforce that provision. We are not told


what form these records will take, for how long they will have to be kept, or for what purpose they are required, other than the general statement of the need for enforcement. We are not told, either, who will pay the cost of keeping the records. These are matters of very great importance, particularly for the small neighbourhood shops. The co-operative movement, contrary to most other multiple chains, is most reluctant to close small shops even though they may be uneconomic in terms of the overall operations of individual societies. Additional burdens of this kind do not help in that development which I hope my right hon. Friend wishes to support and encourage.
On the principle of the Bill, I agree with my right hon. Friend that it ill behoves Opposition Members to criticise the measure in general terms. Consistent carping criticism by Opposition Front Bench Members, coupled with the lack of courage of their convictions when it comes to going into the Lobby or writing a manifesto for an election, puts them in a poor position to criticise the Government's actions on this front. As I pointed out to the hon. Member for Aylesbury (Mr. Raison), it ill behoves one of the greatest subsidising governing parties of all time—a party which indiscriminately subsidised nationalised industry prices with no concern for which part of the community benefited—to tell us that we are the subsidisers, the wasters and the Government who are throwing public money away, when we have carefully chosen a narrow range of products for subsidy which are important in the budgets of the poor, the pensioners and the disabled. Their position is without moral or logical substance, and it was not supported in any credible way by the Front Bench contribution this afternoon.
I want now to deal with the general question of the inequality of the impact of inflation. This is at the heart of the argument. Opposition Members have failed to grasp it and even the hon. Member for Colne Valley (Mr. Wainwright) has not yet understood it to quite the extent I would have hoped. I rely for my evidence on the family expenditure survey and some calculations based on it which were made not only in New Society but by the Low Pay Unit and the Child Poverty Action Group. I

rely, too, on the article, which I commend to hon. Members, which appeared in the Economic Journal last March, pointing out just how the family expenditure survey underestimated the spending problems of the poor.
My right hon. Friend is right to say that the impact of inflation must inevitably be greatest on those groups whose budgets contain large proportions of goods which have risen fastest in price. I should not have thought that we needed to re-establish repeatedly in this Chamber the fact that the poor are the people who do that. The poor are those who spend a larger proportion of their income on necessities. The Conservatives have been talking about the differences between raising money by direct and by indirect taxation. I cannot help feeling that these two systems have one thing in common—they do not fall on necessities. Indirect taxes have never been levied on necessities, and successive Governments, for example, in their relationships with the EEC, have made a great point of not allowing that to happen.
It is not true, therefore, to suggest, even by inference, that the poor pay for the subsidies they are getting through indirect taxes. That is not true in any meaningful proportion.

Mrs. Sally Oppenheim: Is the hon. Member asking the House to accept that the poorer family does not spend a larger proportion than the better-off family on such things as crisps and soft drinks, on which they have to pay a high proportion of the indiscriminate indirect taxation?

Mr. Thomas: The hon. Member well knows that that does not represent the bulk of purchasing by poor families. Food is an important item in the poor family's budget, of course. For a three-child family with an income between £20 and £30 a week, in the last year for which statistics were collected, about a third of that income was spent on food. The hon. Lady cannot seriously suggest that any meaningful proportion of that expenditure was on food that is taxed. She knows that it is not true.
Similarly, the hon. Lady knows very well that a high proportion of expenditure by these groups goes on housing—25 per cent. for the group to which I have referred compared with just over 13 per cent. for the average family. Hon.


Members know my interest in fuel, and the problems of subsidy and the price structures for electricity and gas where there is a similar situation. The necessities of life for the less well-off rose in price much faster between 1970 and 1974 than the items on which VAT and other taxes are paid in large amounts. In that four-year period food prices went up by 61 per cent. The cost of fuel rose by 30 per cent. and the cost of housing by 50 per cent. Yet the prices of consumer durables—colour televisions, hi-fi equipment, washing machines—went up by only 29 per cent. Drink, particularly alcoholic drink, rose by only 16 per cent., and tobacco, whose consumption should be discouraged by the taxation and pricing system, rose by only 4·7 per cent. All that happened when the hon. Lady and her right hon. and hon. Friends were in power, and if she suggests that they preserved the poor from taxation on essentials, she knows that it is not true.
It is a great tribute to my right hon. Friend that since we came into office almost a year ago we have seen a significant drop in the rate of increase in the price of food and in rents, because of the Government's subsidies and rents policies. Those policies are working. I think that I have more faith in them than has my right hon. Friend, who wants to run them down. I do not want to see that happen in the foreseeable future.
I come to the argument in principle about the question of subsidy and Government and State interference in the market mechanism—the relationship of benefits, taxation, income support and so on. There are four main components of the question of subsidy. I very much agree with the hon. Member for Colne Valley (Mr. Wainwright) that they are so inter-related that we cannot debate them under the narrow heading of the departmental responsibilities of just one Secretary of State. I want to try to explain my concern about them and the way in which the Government should be taking a much more inter-related view of them.
There are four general areas at which we must look if we set out to help the less well-off in a time of inflation. The first is the question whether direct, earmarked subsidies such as those we are discussing distort the economic system in

market terms—that is, supply and demand terms—and whether that matters very much.
Secondly, we must consider whether prices, particularly in the publicly-owned industries, but also in the private sector, should be strictly cost-related, or whether, particularly in the public sector, we should aim to pursue what I call "social pricing".
The third question is whether increases in pensions and benefits are more effective in helping the less well-off.
Fourthly, we must consider the rôle of benefits in kind as well as in cash.
I give just two examples of the way in which these matters are inter-related. We are discussing food subsidies, financed out of taxes, whether direct or indirect, and financed also through a clawback in the tax mechanism. My right hon. Friend the Secretary of State consciously relates the two; the March Budget related the two; and I relate the two in my mind. There is a similar example in family allowances. We have another example in rent rebates, 90 per cent. financed from Exchequer funds but 10 per cent. financed out of local rate-raising capacity. They are therefore internally redistributive, because the better-off ratepayer is helping to subsidise the poorer ratepayer. In one sense, those rebates have a taxation component.
The inter-relationship between different aspects means that we must consider them together. I am disappointed that so far the Government show no signs of having done so effectively.
As to the question of direct subsidies distorting the market, we have been given statistics by Opposition Members. We have heard of various matters relating to the current situation. But there is a much larger issue. I cannot take the free market view, so often put in arguments about subsidies, that somehow or other once we play with the economic system it all goes wrong. The fact is that the economic system does not work in a situation of perfect competition.
As an undergraduate, I was told that perfect competition had various aspects. I recall having described to me the 32 criteria which had to be met before perfect competition could be obtained. We had a creature called economic man, who behaved rationally. But we all know that


the general public do not on the whole consistently behave rationally. There had to be equal access to knowledge, equal information about products, equal facility to go to different shops, and so on. We all know that that does not happen. We have only to look at the problem of the poor consumer who has to shop at the corner shop, or the problem of the rural consumer, to see that it is just not so.
The free-market approach—the "in-principle, root-and-branch" opposition to subsidy—must be discarded to the dustbin of the history of economic theory. It bears no relevance to the management of an economy in which the State plays a large and rightly increasing part, in which the distortions already exist, and in which the principal problem is not seeing whether we can avoid distortions in the market but trying to make sure that the distortions work in favour of the less well-off. Those are the criteria by which we should work.
When I speak of "social pricing" I ask whether we should continue in a whole number of areas to regard it as vital that prices shall be strictly cost-related rather than related to social priorities. Obviously, prices can never be totally unrelated to costs. One cannot fly in the face of the overall economic logic of the situation for ever. But there are other parameters, other considerations, which must be taken into account and which are components in the Government's policy.
There is the whole question of the social contract. There are questions of wage demands; the effect of prices on them, which are an important priority for the Government; the protection of the less well-off; and energy conservation. All these matters cut across the economic argument that prices should be directly related to costs.
We already use prices to redistribute wealth. The discrimination is not enough, but there has always been a small discrimination at the end of the scale against charging the whole of the fixed cost of supplying electricity or gas to a small consumer or a rural consumer. We have never tried to charge a cost-related price to that class of consumer.
Another example is the fact that to send a letter from Whitehall to the Houses of Parliament costs exactly the same as

to post one from Land's End to John o' Groats, though the former may take slightly longer.
In the main run of things, firms, whether publicly- or privately-owned, do not discriminate between urban or rural consumers where they can avoid it, even though the cost differences are substantial.
There was an announcement in the House only yesterday about television licences. My right hon. Friend the Secretary of State for the Home Department was announcing that he had consciously discriminated, not on cost-related grounds but on social grounds, between the price of a licence for a colour television and that for a black and white television.
In the private sector there is a voluntary agreement with the retailers to restrain price increases on certain products, which must in essence involve a redistribution of wealth through the pricing system. I am in favour of that. I do not think that a matter of principle is involved. It is a matter of degree.
I agree with some of the points made by the hon. Member for Colne Valley about increases in pensions and benefits. My right hon. Friend the Secretary of State referred to the statements of the Child Poverty Action Group. I know from my discussions with its representatives that it would not diminish its attachment to increases in benefits because it has started to see the benefit of subsidies. We must look at the long-term inflationary situation and at our capacity to finance benefits, whether they be discriminatory or blanket benefits. Our capacity to finance benefits will become more restricted as the amount of money required increases.
The take-up rate of many benefits is appallingly low. We must look again at subsidies and "social pricing" as ways of assisting the less well-off. We must also consider benefits in kind, whether financed through pricing or direct Government financing. I have in mind, for example, the Republic of Ireland, where certain categories of pensioner—a large number of people—pay no standing charge for their electricity and receive as a matter of right roughly 200 units per two months during the summer and 300 units per two months during the winter free of charge. There are no problems


of take-up or stigma. The benefits are paid for by the Exchequer. We must not be deterred from subsidies or benefits in kind when frightened old people are dying of hypothermia rather than take a discriminatory benefit or receive an electricity bill which they fear they will be unable to pay.
I support the principle and practice of the Bill, although I wish it showed signs of being part of a clearly thought-out Government co-ordinated strategy to deal with the problems of the less well off.
As regards subsidies and "social pricing", we are doing a good job with food, and we seem to have the rent situation in hand for the time being, but very little has been done about fuel. We know that those are the three major items in the budgets of the poorest individuals and families.
Although the subject of benefits is not strictly relevant to the debate today, I generally approve Government policy. With the possible exception of the way inflation is starting to take low-income families into the taxation threshold, we can see some sense in the taxation policies being pursued. However, I do not see, in those policies being pursued in various Government Departments, co-ordinated thought as to how the package is to be put together. Inevitably, in a debate such as this we are not able to deal with such policies that ought to be interrelated in an adequate fashion.

6.25 p.m.

Mr. John Wakeham: I am delighted to be called immediately after the hon. Member for Newcastle-upon-Tyne, East (Mr. Thomas) because he courteously wrote to me recently stating that he had accepted an invitation to speak to the Maldon Labour Party. I did not seek that invitation. Nevertheless, I hope he has a happy evening.
Part of the speech of the hon. Gentleman was devoted to the co-operative movement. I wish to refer to the private sector of industry as it is affected by the Bill, because there is a growing sense of unreality and a difference between us about how we should debate and legislate for our economic affairs and how those engaged in business and commerce have to deal with the realities of them on a day-to-day basis.
I must declare an interest as a chartered accountant. I am involved with companies which will be affected by the Bill to a greater or lesser degree. I do not intend to deal with the subsidies, although I wish to draw a clear distinction between price regulations affecting subsidised items and price regulations affecting items which are not subsidised.
Clause 2 gives the Secretary of State powers to issue price regulation orders. There is clearly a case for price controls over those subsidised items.
The major part of the debate is over the difference of opinion about whether subsidies are the most efficient and effective way of using a given sum of money to help those most hard hit by price increases. Price regulations are necessary in the public interest if the taxpayer's money is used in the form of subsidies. With unsubsidised items we are in a different situation.
I appreciate why the Minister has not used her powers under the 1974 Act, but I wonder whether it is wise to retain them in this new Bill. The statutory control of prices is acceptable only as a means of achieving the necessary wage restraint. Even then it is necessary to draw a distinction between the political advantages of price control in encouraging the acceptance of wage controls, and the economic dangers of price controls on industrial and commercial profitability and investment.
I disagree with the powers of the Secretary of State in Clause 2 to make price regulations for non-subsidised goods. I think the principle is wrong and is hardly likely to have very much practical effect. We have only to look at the Price Code to see how many changes and complications have had to be introduced to produce a semblance of fairness and to avoid the worst distorting effects that are bound to occur if we use price regulations over any length of time. I suggest that the presence of meaningful price regulations for non-subsidised goods is harmful to the economy as it deflects attention from one of the major causes of excessive price rises in our economy.
The CBI has estimated that over the whole range of goods and services the total abolition of price controls would push up prices by 2½ per cent. Although


no one should minimise the effect of any price increase, especially on those with low incomes, such rises from this cause are relatively small considering the effect on prices from other factors. Price regulations, even if used in the context of Clause 2, could fast become an end in themselves, with very little effect. Their main practical effect would be to give further work to hundreds of public servants and to waste thousands of management man-hours. It is probable that they would also breed a new group of accountants who, as the Government bottled up all the avoidable loopholes in the tax legislation, would become skilled in the interpretation of price regulations. I suppose that professionally I should not complain about that. However, from the practical common-sense view, it is something we do not want to encourage.
If as a nation we persist in this crazy notion that we can stop the tide of price increases by price regulation or even by subsidy I suggest to the hon. Member for Newcastle-upon-Tyne, East or to anyone else who visits my constituency that he should also visit the village of Canute, where King Canute tried to stop the tide coming in. Anyone who did that would very soon realise that by passing such regulations we shall not achieve the end that we all seek.

6.30 p.m.

Mrs. Maureen Colquhoun: I tend to agree with the hon. Member for Colne Valley (Mr. Wainwright), who said that we ought to be having a broad-based debate on alternatives to food subsidies. We are not having that today, and I think that it is about time that the Conservative Opposition said what they would do about food subsidies, given the opportunity.
We have before us an extraordinarily tough amendment which makes no real declaration of the Opposition's intentions on food subsidies, which contributes nothing to a real debate, and which poses no real alternatives. This House and the electorate outside it are entitled to know what the Opposition would do if they were in Government. Would they continue food subsidies and, if so, for how long?
The Opposition's intentions about food subsidies have never been clear to me—and I served on the Standing Committee which considered the original Prices Bill and listened very carefully, through sitting after sitting, to a very hard-line philosophy of opposition to subsidies which in the last analysis amounted, surprisingly, to nothing. It was what I call "tongue in cheek" opposition. No Opposition Member had the courage of his convictions to vote against the Government's proposals.
Listening to the Opposition today, and reading their amendment, I am forced to turn for information to the message which the Conservative Party sent out to the electorate four months ago. My right hon. Friend herself was forced to seek information from the same source. In that message the Conservative Party said:
With the urgent need to stabilise prices, we accept that it will be necessary to retain these subsidies for the time being.
We are forced to conclude that the key words in that promise rest in the phrase "for the time being".
We have a situation today which appears to mean that the Opposition want no subsidy at all. I know that it is said that political promises are like piecrusts, in that they break, but this appears to be a promise broken before the pie is even baked. As such, it deserves a place in the Guinness Book of Records. I therefore ask the Opposition to spell out clearly their intentions on food subsidies.
It was the extraordinary rise in the food retail price index which set the Labour Party on the road to food subsidies with the promise to subsidise basic food prices. We won the February election on that promise, and we honoured our promise.
Today, my right hon. Friend seeks to make amendments to the Prices Act in respect of the continued payment of food subsidies and the regulation of prices. I believe that this House should support her overwhelmingly. It is more important than ever to subsidise the basic foods in 1975 because the battle to control prices has not been won, although the fight is continuous. What is more, with the rising cost of living, distressing tendencies of the elderly and of large families in cutting back on food are beginning to show.
Everyone receives the subsidy, but, as my right hon. Friend pointed out, those who do not need it contribute in taxation their share of financing the subsidy. That seems to be a perfectly reasonable method of redistributing income. But what is undeniable is that it is even more necessary today for the Government to continue to subsidise the basic foods of milk, butter, cheese, flour, bread and tea—the foods which appear week after week in the shopping baskets of the nation. I believe that it would be unthinkable at this stage of crisis to abandon the subsidising of food, and I am very glad that the Government have no intention of failing to subsidise, no matter how many votes the Opposition manage to stack up against my right hon. and hon. Friends later tonight.
Often we hear gales of merriment from the Opposition about the social contract, but it is a very important element in why we won the last General Election. We were able, as a Government, to enter into a contract with the British people. It is time to stick by that contract, and food subsidies are an essential part of it. Many of my hon. Friends think that it is also time that my right hon. Friend inquired into the huge profits being made out of sugar by such companies as Tate and Lyle. I believe that it is time for the Opposition not to be destructive in their approach to food subsidies. If they insist on tabling destructive and unreasonable amendments like the one before us today, they have an absolute responsibility to declare their own intentions.
The electorate are taking a very careful look at what is happening in this House. How the ordinary shopper copes with the rising cost of living depends very much on what the Government do. It is quite easy, in this British House of Commons, to talk about percentages and about the elderly in complicated and sometimes quite contorted English, but people outside want to know that right hon. and hon. Members really care about fighting the battle of inflation for them and with them. I have no doubt that that battle has to be fought by the Labour Party.
Reading about today's debate, people outside the House will think, as they always have, that, as usual, the Opposition are out of touch with the problems of ordinary people and are interested

only in their own hard-line philosophy, that there should be no subsidies. It is indefensible of the Opposition to play what in the past few days has developed into the new parliamentary game of how the money is to be spent. It has been decided. Our priorities were decided when the electorate voted us into office in October, and one of the first priorities was to spend money on food subsidies.
That was part of our programme, and it is a great tragedy that the Opposition fail to declare themselves in simple terms instead of wriggling and indulging in the contortions which we have constantly seen over the issue of food subsidies. If, at this moment there is any other way that they seek and if, thereby, they wish to take away the food subsidies, they must spell out their policy to the nation simply and clearly—and I ask them to do so today.

6.40 p.m.

Mr. John Moore: Without wishing to pursue too far some of the tautologies of the hon. Member for Northampton, North (Mrs. Colquhoun), I gently suggest that it is not sufficient, in a parliamentary democracy, to continue, simply to say that a policy once introduced is adequate, and that the Opposition should lie down from then on and not debate, discuss, approve or disapprove by carrying out what one would imagine is the rôle of Parliament. But we should be seeking measures for the variation or reduction of public expenditure. That, after all, is one of the major things we are here to do.
I make the hon. Lady fully clear, as the Secretary of State should be, about my position. I seek no ambivalency. Throughout my brief service in this House—I made my maiden speech on this topic in April—I have been totally opposed to food subsidies of a blanket and indiscriminate kind, such as those that the Government have produced. I listened with care and pleasure to the words of the hon. Member for Colne Valley (Mr. Wainwright) and found little with which I disagree.
We have to be measured in our observations and try to leave politics aside a little more, and the key test is the extent to which these subsidies are lessening the cost of living effectively—and "effectively" is the key word. A lot of cant


and hypocrisy has been spoken, not just in this House but elsewhere in the country, on this topic. It would be difficult to imagine that £500 million, £1,000 million or £1,700 million could not serve in some way to ameliorate the rise in the cost of living for some people. The question we have to ask ourselves is whether this public money is being spent in the most effective way. I doubt it thoroughly.
At one stage last year there might have been a limited number of arguments—although I disagreed with them—for introducing, on an emergency basis, a form of ratchet to try to take into account two features which were marked in the early part of last year. The first of these features was the threshold agreements introduced by the Conservative Government. The second was the long pattern, continuing throughout most of the year and still in operation, of massive increases in world commodity prices. I accept that there may have been valid and logical arguments for an attempt to ratchet these features back, although I did not endorse those arguments.
However, the problem we now face concerns the degree to which this temporary expedient of food subsidies is to be allowed to remain part and parcel of our public life. If we go on from here for at least another year, we shall place ourselves in the position of having permanent subsidies, which, I suggest, will be very uncomfortable to both sides of the House in the long run, and the disentanglement will be extremely difficult.
It behoves us to ask one or two questions about what food subsidies do. I do not think it necessary to apologise to the Secretary of State for reiterating certain arguments, because such reiteration does not necessarily mean that those arguments are invalid. They have been received by totally deaf ears so far, but one always hopes that those ears will hear.
I stress that food subsidies increase the cost of living for many families. I will let those words sink in. We have been discussing how much food subsidies have ameliorated the food price index, but they could increase the cost of living not only for poor but for middle income families. But the burden is not simply one of direct as against indirect taxation,

although that is a key feature. In the introduction of certain specific food subsidies we have created a situation in which pre-selected products are to be relieved. As we often do when we seek to manage society, we have made specific choices, but those choices do not necessarily impact similarly on all families.
I am constantly returning to the arguments about old-age pensioners. The arguments are equally valid on the other side. Too much hypocrisy has got into the discussion, and I am afraid that at the end of the day many pensioners may suffer from it. The Secretary of State specified £13 a year as the benefit factor. But there may be old-age pensioners and poor families who are more impacted by the increasing costs of lighting, heating, cigarettes—some happily smoke—and of beer—happily some are able to afford a pint of beer. We are imbalanced in our discussion if we concentrate too specifically on a list of pre-selected items and assume that all the poor are gaining benefit from them.
It is extremely important, in the context of the difficult crisis in which we are living, that subsidies of this kind distribute, in a very indiscriminate fashion, money sorely needed generally. The right hon. Lady specifically said that the elasticity of demand for milk was very low. I do not understand that elasticity of demand in relation to the figures given by my hon. Friend the Member for Aylesbury (Mr. Raison). He drew attention to the fact that there has been an increased consumption of 50 million gallons. To me, that is not marginal in terms of its impact upon, for example, the waste factor that arises. Many people cannot afford even 6p a pint, but the Government do not discriminate in their favour in this Bill. But if the price were at 8½p per pint, which is what it would be without subsidy, many other people who can afford 6p a pint would be more conscious of the price and, therefore, more conscious of the waste induced within that increased consumption figure of 50 million gallons a year.
I found the arguments from the right hon. Lady about the distribution of money very thin in terms of the indiscriminate nature of the subsidies. She quoted from the submission to her by the Child Poverty Action Group, stressing


that it had said that it was changing its attitude. It is reasonable for it to do so in the absence of any more viable specific measures by the Government. In that context, the group clearly cannot dispute the relative advantages of food subsidies. However, the right hon. Lady did mention that the group still prefers more specific benefits.
But I have to be more specific because one of our difficulties in the debate is the "either/or" alternative. I do not think that we can afford the money in toto, but I noticed the other day that the Government had abandoned plans for the rebuilding of St. Mary's Hospital, Paddington—and I take an example which is not in my own constituency. We all recognise St. Mary's as an eminent teaching hospital which has done great good for our country. The cost of rebuilding would be £36 million. In the Bill we are dealing with astronomical figures of £1·2 billion and £1·7 billion. The administrative cost of annual subsidies is now running at the rate of £700,000. For a 15-year hospital-building programme that amount would be sufficient to finance the interest charges. There are always viable alternative programmes, and we should recognise them. That is a specific project that has been cancelled.
I recognise—and my hon. Friend the Member for Aylesbury has discussed very completely—the distortions of demand. But we should look at one specific negative that the nation has to suffer from—the increase in milk consumption with the relative decline in cheese production, though not in cheese demand. This has, of course, increased the importation into this country of subsidised cheese. We have not discussed—and I should like to be provided with better figures on the subject—the balance of payments costs involved in this.
Fourthly, and much more important to me, it increases consumption generally at a time when we are supposedly conscious in our country of the need for decreasing consumption. My hon. Friend mentioned the tea problem, but what strikes me most and produces my fundamental objection is the degree to which this mania for food subsidies fails necessarily to increase domestic food production. I look at this from two main points of view.
We have to begin to be a country living in the real world. The real world is one in which I would like us to be very much more conscious of self-sufficiency and the independence that self-sufficiency produces. The measure that the Secretary of State has presented to us today can only encourage the unsatisfactory lack of self-sufficiency that this country already sees in the field of food production.
It is very relevant in this Chamber to draw attention to the absence of help to the under-developed nations of this world. That is exacerbated by this measure. I will elaborate. Yesterday, as we know, the Select Committee seeking to advise us on how help can be given to underdeveloped countries referred to two things which it was felt we should be doing. One was that we should be helping to keep up commodity prices, as a key factor. What are we doing instead? We are increasing the importation of food rather than trying to increase our own production of food so that we do not take from the world's base food production.

Mrs. Shirley Williams: That is a very interesting but very strange argument, because of all the goods we subsidise only one comes from the developing countries; that is, tea, which is precisely welcomed by the Indian Government as helpful to them.

Mr. Moore: The Secretary of State should recognise that because leaders in certain countries may make what I regard as short-term statements that does not necessarily mean that those statements are valid in terms of the absolutely essential problem of the world's long-term food supplies. I stress that because I believe it behoves us all to remember our actions in relation to the attitudes we have today, which I regard as the height of national selfishness. We should remember them in the light of what the late Lord Attlee, whom one should not have to quote, did in a similar situation. He insisted on introducing bread rationing to endeavour to reduce imports of grain into this country so as to help the rest of the world. As far as I am concerned, this measure tonight increases national consumption, increases national waste and does nothing to increase necessarily domestic food production; and in that way it harms the rest of the under-developed world.

6.55 p.m.

Mr. George Rodgers: I do not intend to follow the path trodden by the hon. Member for Croydon, South (Mr. Clark). I concede that I was fascinated by the route he took, and interested to learn that apparently some pensioners are at a disadvantage because of the food subsidy system. I have yet to hear that from one of these pensioners, but I look forward to the occasion when I do. I intend to be brief and to concentrate my remarks on a very small area of the debate.
If the social contract is to survive it is essential that there should be a policy and system of price control that not only operates efficiently but is seen to do so. I suggest rather sadly that this is not the present state of the game. Only today I received a letter from an old-age pensioner in my constituency who expressed in very simple but adequate language the experience and fears of so many, from which I ask permission of the House to quote briefly:
I am writing to you as a pensioner because I am very concerned at the ever-increasing prices on all things, much more so in the case of heating and lighting and most important, food. Prices are rising almost weekly not by ½p or 1p but by 2p or even more and I have no doubt you are well aware of this. I know we have been promised an increase in pension in April but as inflation is growing, unless the increase is substantial we shall be no better off. I could quote you many items of increase but I will mention only one, my jar of marmalade. Last August it cost 10½p per one pound jar, since when it has increased in stages to 11½p, 13p, 15p, 17p, 19p and now, last weekend, to 21p, an increase of 100 per cent. while our pension remains static.
I find it no consolation or comfort that with ever-increasing prices there is a complex formula to control prices. People may be generally aware that prices may be raised at only three-monthly intervals but are certainly not aware of the multitude of exceptions to the regulations and certainly have no notion of when a three-months' period begins and ends.
The ordinary housewife is perhaps also aware that there is at some great distance a remote authority that is supposed to protect her from unfair practices, but how effective are the rules? How effective are price restrictions, and how easy is it for an unscrupulous trader to take advantage of the housewife in overcharging? I was astounded that in reply to a Parliamentary

Question I submitted recently the answer revealed that, to date, there have been no prosecutions at all under the Counter-Inflation Act 1973, and that the Department of Prices and Consumer Protection is not aware of any prosecutions that have been undertaken under Section 2 of the Prices Act 1974, the powers of which lie with the local weights and measures authority.
Even accepting that we are an extraordinarily virtuous nation, I still find it incredible that it has not been found necessary to utilise these powers in even one case. I hold the view that law without punishment is merely advice, and I decided to explore the situation in some detail. The position I found is that in local government the departments responsible for administering those powers are desperately understaffed. There is a grave shortage of qualified staff and a frightening lack of revenue in town halls. Superimposed on this calamity, each weights and measures department has acquired a vast range of new responsibilities.
Most women have a strong suspicion that prices are going out of control. I do not for a moment question the good intent of my right hon. Friend the Minister or the good will and competence of those whose task it is to administer the laws relating to prices and consumer protection. I do, however, plead that urgent steps be taken to create a system worthy of its purpose to provide clear evidence of the Department's rôle as watchdog on behalf of the housewife. Investment in this area will have a devastating impact and will restore confidence where it is most needed. Additionally, it will carry good will into other related zones, the zones of waste regulation and the social contract.

7.0 p.m.

Mr. Ian Gow: The Secretary of State began her speech this afternoon by quoting the reply which she gave to my hon. Friend the Member for Barkston Ash (Mr. Alison) on 11th November last, so now, for the third time in only two months, I repeat the words which she used first on 11th November and again today. She said:
I have always made clear that in the long run our hope is that we might be able to phase out subsidies in the interests of other kinds of social expenditure."—[Official Report, 11th November 1974; Vol. 881, c. 8.]


I emphasise the word "hope". We have it on high authority that the supreme moral virtues are faith, hope and charity. Many theologians take the view that, of the three, hope is the one which is most neglected. One can only say of the right hon. Lady that she ignored that virtue altogether in the speech that she delivered after making the quotation from herself because, having expressed the hope that she would be able to phase out food subsidies altogether, she went on to recommend to the House that it should give a Second Reading to a Bill which moves in precisely the opposite direction.
The Bill goes in a direction opposite not only to her own hopes but to those hopes of the Chancellor of the Exchequer because, in his Budget Statement, when talking about the nationalised industries and the desirability of removing subsidies from them, he said:
I have set it as my objective to phase out these subsidies … as fast as possible."—[Official Report, 12th November 1974; Vol. 881, c. 268.]
Sometimes the Opposition wonder whether the right hon. Lady and the Chancellor of the Exchequer are members of the same administration. I wonder whether they ever meet. Why does not the right hon. Lady invite the Chancellor of the Exchequer to spend the weekend with her, when she and the right hon. Gentleman would have plenty of time to reconcile what to the Opposition seems to be totally irreconcilable.
Where does this policy of subsidies end? On 9th July—as recently as that—the first Prices Act received the Royal Assent. Now, only six months later, we are invited to increase by £500 million the amount which the Government will be able to spend on food subsidies, from the permitted level of £700 million to £1,200 million, and with power by order to go to the really terrifying figure of £1,700 million. I ask the right hon. Lady where this is going to end. How long will it be before we have the third Prices Bill introduced by the right hon. Lady?
My first objection to the Bill is that once this course is embarked upon it will become increasingly difficult for the right hon. Lady to satisfy her own hopes. Indeed, we find in a short space of six months since her first measure received

the Royal Assent that she is here with the second, and I make the prediction that, if the present administration remains in office, within 12 months from today the third Prices Bill will have to be introduced because, once embarked upon, it will be impossible to escape from this policy of ever-escalating food subsidies.
There is another matter which I should like the right hon. Lady to discuss with the Chancellor of the Exchequer. Last night, after the House had carried an amendment which will involve an increase in public expenditure, in our view of about £45 million a year, and in his view at Question Time today of £145 million, he said that he regarded the modest amendment that we had carried as unacceptable, because it would increase the borrowing requirement. What kind of view does the Chancellor take of the Bill? I wonder whether he will be in the House tonight to vote with the Government, knowing that this measure could involve an increase in the borrowing requirement of £500 million in the current year, going up to £1,700 million.
The contention that because taxation is paid for by the better off our argument that this subsidy is wasteful no longer applies, does not stand up to examination. If this amount of money is available to be distributed out of taxation—£500 million in the current year—surely even the right hon. Lady must agree that it would be infinitely preferable to increase family income supplement, to increase the rate of supplementary benefit, or to increase the rate of family allowance, because it is at least taxable.
The great trouble with the Bill is that it will distribute money primarily to those households which have an income of more than £50 a week. That was the answer which the right hon. Lady gave me in November—that 52 per cent. of the subsidy goes to households with an income of more than £50 a week.
The continuation of food subsidies is concealing from the British people the truth about the cost of food and the truth about the economic reality. For those reasons, my hon. Friends and I will most certainly oppose the Bill in the Division tonight, and I hope that the right hon. Lady will think again about this matter.

7.6 p.m.

Mr. John Golding: The hon. Member for Eastbourne (Mr. Gow) said at the end of his speech that the Bill will conceal the truth of economic reality from people. The truth of economic reality for many of my constituents, particularly housewives, is that they are constantly without sufficient money in their purse to be able to buy what they want in the shops. They have faced economic reality throughout their lives, and it would do Tory Members good to have to survive for a short time on the incomes on which those whom I represent have to manage, because then they would know what the Bill is all about.
A short time ago I read that the Secretary of State was the pin-up of the Manifesto Group on our side of the House. I do not know about that, but I know that my right hon. Friend is the pin-up of many ordinary people in my constituency. She is certainly one of the most popular members of the Government because of what she is doing by way of food subsidies.
I have long been an advocate of food subsidies. First, I have seen what it is for families not to be able to buy enough food to feed themselves and their children, and food is essential. I do not believe in providing indiscriminate subsidies across the board, but I do believe that the mark of a civilised society is that it provides food and shelter for its people. Therefore, I support the provision of subsidies for food and housing.
My second reason for supporting the provision of food subsidies is that it is a transfer payment from men to women. I see food subsidies as a straight transfer payment from the salaries, and, probably more important, the wage packets, of men to women. At a time of inflation, one of the constant problems confronting women is that the money given to them by their husbands increases less rapidly than do the wages and earnings of the men themselves. Food subsidies ensure that, to some extent at any rate, women are protected during a period of inflation.
I also support food subsidies because when one traces the source of tax from which they are paid it can be clearly shown that they lead to a transfer of

wealth from those who are better off to those who are worse off. I use those words carefully. I did not say that it was a transfer payment from the rich to the poor. It is, but, more important, it is a transfer payment from the better off to those who are worse off.
I am aware that many of the people whom I represent in the Post Office Engineering Union may, because of the level of their pay, be adversely affected by this transfer payment. None the less, I shall continue to support the transfer from the better off to the worse off because it is not only the pensioner or the person on State benefits who finds it hard to manage in our present society.
There are many people in low-paid jobs who feel the pinch quite as much as the pensioner or the person on supplementary benefit. It is that group with earnings above the level which attracts the family income supplement but below the average level of average wages with whom we must also be concerned when we think in terms of the redistribution of income.
I advocate the use of subsidies. I think that it will be a long time before we shall be able to say that the time of poverty has gone, that the time of hardship is no longer with us and that we can end subsidies for food and shelter. Having supported the subsidies, I must put in one warning note. I have found when I have argued this matter in correspondence that my right hon. Friend has been particularly considerate. If we are to interfere in the pricing of either food or shelter we must be clear that the cost of that interference must be met by all. In no sense should a cheap food policy be paid for either by farm workers or by the bakers.
I represent large numbers of farm workers and bakers. The bakers have brought home to me the importance of this point. They feel resentful when they go into the shops and see that supermarkets are using bread as a loss leader. Then when they go to ask for a wage increase they are told that the firm cannot afford it. One reason for the industry not being able to afford wage increases, so they are told, is the price control of the Secretary of State for Prices and Consumer Affairs. I accept the assurance of my right hon. Friend that that situation has not prevailed. None


the less, it is important for us that we convince the bakery workers of the truth of my right hon. Friend's assurance.
If we are to pay subsidies they must allow adequate wages to be paid in the industry. The wages should equate with what they would be in a free market situation. We must be careful to ensure that we are not pursuing a cheap food policy at the expense of the workers' wages. That is true of both farm workers and bakers, who are in the low-paid category. I ask my right hon. Friend to be cautious about that.
The one thing above all that has been welcomed is the introduction of price lists. When I have been to meetings of the Senior Citizens' Club of the Transport and General Workers' Union in North Staffordshire two items have always cropped up. One item is the price of cheese. That always seems to upset the old people. It is a constant preoccupation of the senior citizens. They notice how the price of cheese seems to go up rapidly in a cheese-producing area on the borders of Cheshire.
The second item is that they want to know when the notices will go up in the shops to inform them of the maximum price that should be paid. I understand that the price notices for bread are already displayed. I understand that the maximum prices for butter and cheese will be put up on 17th February.

Mrs. Shirley Williams: The notices will go up, not the prices.

Mr. Golding: Yes, my right hon. Friend corrects me. The shops will not be putting up their charges but displaying the charges. That was a misunderstanding due to my use of the vernacular, which I am sure the people of North Staffordshire will understand.
The shops must display the prices of the three most commonly sold goods. I believe that that will be useful for many people. They will be pleased that it has happened. If tea and flour are to be subsidised the prices of those commodities should also be displayed. I hope that my right hon. Friend will turn her attention to that matter and deal with it as quickly as possible.
I believe that the point that has been made about the social contract is abso

lutely right. It will be difficult to make people accept the need to restrain wage demands if there is no control on prices. It is fairly easy to explain to people that they must limit wage demands when they can survive. But they cannot survive in any real sense if they cannot afford food and shelter. It is when they cannot go to the shops on a Wednesday, never mind a Thursday or Friday, to purchase enough food for them to last the week that the real pressure will come on the husband from the wife to obtain as high a wage increase as possible. It is on this fundamental point that the pressure will arise.
The Government will be wise, so long as they want the social contract to be observed, to maintain subsidies on food and housing.

7.19 p.m.

Mr. Michael Alison: The hon. Member for Newcastle-under-Lyme (Mr. Golding) paid his right hon. Friend a handsome tribute when he referred to her soaring popularity and said that she is one of the most popular Ministers and one of the most popular Members of the House. That is a fair point. I discern a trace of the explanation for her soaring popularity in the Explanatory and Financial Memorandum of the Bill we are now considering. The acid test will be whether the right hon. Lady is prepared—I now use a phrase which she has used before—to phase out her popularity. This is a short-term popularity. There is a real danger that when the cost underlying this short-term popularity is appreciated it will evaporate even more quickly than it would have done when phasing-out comes.
In this connection I draw the attention of the right hon. Lady to what I consider to be one of the great gaps in the information the House ought to have when it comes to consider a Bill giving the Government power to launch into astronomical sums of public expenditure. We are talking about a potential net increase in public expenditure, as far as I can see, of over £1,000 million, if the right hon. Lady goes up to the full limit. This is 5 per cent. of the total public expenditure as forecast for the current year in the related White Paper. That is expenditure of all sorts, capital and consumption for goods and services.

The Minister of State, Department of Prices and Consumer Protection (Mr. Alan Williams): I hope that the hon. Member will bear in mind that he is making a comparison with a two-year figure for the subsidies, as compared with a single-year figure for overall public expenditure. I do not think that the figures work out as he suggests.

Mr. Alison: I was talking about the global figures quoted here, and not making any sort of judgment when this expenditure will arise. I shall come to that later. I am simply comparing the global figures embraced in the Bill with the coming year's total public expenditure on goods and services, capital and consumption, which is about £20,000 million. It is in this context that Parliament is faced, in present circumstances, with a chasm in the information provided to it. This chasm concerns information on financing. It was touched on most eloquently by my hon. Friend the Member for Eastbourne (Mr. Gow). There is a lack of information about the way in which, in the present context, these sums will be financed.
There are two great chasm walls which overshadow and bring out more starkly the information chasm. One of these walls is the public sector borrowing requirement and the other, most important wall, is the overseas balance. On the public sector borrowing requirement, which my hon. Friend the Member for Eastbourne rightly introduced, I draw the Minister's attention to some advice we were given by Mr. Ward, of the Department of Applied Economics at Cambridge University, during the course of his advice to the Expenditure Committee and its General Sub-Committee of which I am a member.
Mr. Ward was analysing the supplementary Financial Statement produced for the November Budget. He pointed out that the Financial Statement issued at the time of the March Budget contained an estimate for the public sector borrowing requirement of £1,170 million. The estimate in November, eight months later, and before the Budget changes, had risen from £1,170 million to £4,100 million, which represents an increase in the financing deficit of £2,931 million—equivalent to 4 per cent. or more of the gross domestic product, or greater than the policy change in the financial balance

introduced in any Budget since 1950–51. Mr. Ward pointed out that this substantial revision, from £1,000 million to £4,000 million-odd in the public sector borrowing requirement, before Budget changes, arose wholly from increases in the estimate of public expenditure between March and November of this year. In that eight-months' period it was quite plain that the main single cause of the increase was the change, in percentage and absolute terms, which occurred in expenditure on subsidies.
Subsidies, whether they be for public corporations or for food, increased between March and November by £1,000 million. The public sector borrowing requirement after the Budget changes of November had been announced was not the £4,000 million I have referred to; it had risen to £6,000 million. We now have an overhang of public sector borrowing of about £6,000 million and, as far as I can see, none of this takes into account the net increase in possible subsidy payments which are being budgeted for in this little Bill.
Against this background, therefore, we must have some sort of indication about financing. Will this immense potential increase in subsidy payment, equivalent to the earlier £1,000 million increase, if and when it comes to be spent, go straight on to the public sector borrowing requirement, as did the increase in subsidy between March and November? We must have information on this, because we cannot discuss the Bill rationally unless we know how the financing is to be arranged.
The only alternative is clearly to increase taxes, including social service contributions, or, somehow, to look for some increase in the trading surpluses of public corporations, or to increase their various charges. We must know this. If the bill for this extra £1,000 million is to be met by increases in taxes or social security contributions, clearly either alternative will have a profound bearing upon the rationale of the subsidy scheme. For example, if we are to go in for increases in domestic taxation—on indirect taxes, for example—to finance this extra bill, it makes little sense to introduce a programme of regressive taxes to finance a programme of subsidies 52 per cent. of which go to those earning over £50 a week.
It is profoundly relevant to an appraisal of this Bill for us to have some information about financing. Will it be through the public sector borrowing requirement, charges, contributions through the social security system, or extra taxes, direct or indirect? It is impossible to make a rational judgment of the Bill unless we have some such indication. If the public sector borrowing requirement is to be the engine for financing this huge net increase then we ought to have some idea as to whether the right hon. Lady thinks it will be financed as to borrowing by net contributions from the private sector in the domestic economy or whether it will all go to the overseas balance, as the present net borrowing requirement largely seems to be going.
If the Government are to be able to persuade the private sector to save £1,000 million and to buy gilt-edged securities to enable the right hon. Lady to transfer this buying power to the consumers of food, then we shall have no net increase in demand impinging on the foreign balance. There will be a pro tanto compensating offset in purchasing power in the economy. If it goes straight into foreign borrowing there is bound to be an exact and equivalent increase in the inflow of goods and services. Here I take it as axiomatic that the Government will not borrow the money through the banking system. That would be directly inflationary.
If it is not financed through lending by the private sector, and if the overseas sector lends it, there will be an exactly equivalent inflow of goods and services, to the detriment of the balance of payments. These are the vital items of input information we need to make an appraisal. I hope that in replying the Minister of State will fill in the gap about the financing of this huge potential deficit.
One of the curious things about the provisions in the Bill is that, as far as I can see, they do not seem to be reflected in the official estimates of expenditure provided in the latest Public Expenditure Blue Book. I refer the Minister of State to Table 2.3, on page 28. The strange thing is that if we look at the food subsidies column and take the year 1974–75 through 1975–76 and onwards, we find that in 1974 survey price terms there is an

appreciable and steady decline, in real terms, in subsidy payments.
Are we to understand that the right hon. Lady is phasing out subsidies in real terms and that this huge bill is an attempt to conceal the fact and to compensate for inflation? Is she trying to keep up with inflation with this extra sum, but not quite succeeding, and in real terms phasing out subsidies? We must have that information. Are the Government saying that they want powers to take an extra £1,000 million for subsidies but at the same time the subsidies bill is going down, in real terms? Are the Government, in real terms, increasing the subsidies or phasing them out?
It is extremely unsatisfactory for the Government to ask for another £1,000 million, in this context, without telling us how it will be financed. I hope that the Minister of State will give us unequivocal information and make clear whether the money will come from the overseas sector, the private sector at home or, as I hope it will not, from the banking sector.

7.31 p.m.

Mr. Ivor Clemitson: I wish to go back to two arguments put by the hon. Member for Croydon, Central (Mr. Moore). One of his arguments against huge subsidies was that they encouraged waste. Any hon. Member who was born before the great divide of the Second World War will have been brought up to believe that waste is a great evil. Perhaps we have forgotten that in recent years. "Waste not, want not" is a piece of conventional wisdom that perhaps needs to be resurrected. To say that the way to avoid waste is to allow the full market price to be charged is a strange argument. It seems to imply that those who are better off, and the rich, are somehow more fortunate than the rest of us and do not need that kind of discipline, or that their impact on the total economy is so small that we can forget it.
The hon. Member for Croydon, Central went on to say that there are some people who are too poor to buy milk even at the subsidised price of 6p. The logic of that is that if the price of milk went up to 8½p, which the hon. Gentleman suggested would be the price of unsubsidised milk, more people would be unable to buy it. I am all for less waste,


but let us not take the usual pessimistic Conservative view of human nature. Let us try to achieve a reduction in waste by other means than allowing prices to find their supposed market levels.
The hon. Member for Croydon, Central spoke about world trade and the hon. Member for Barkston Ash (Mr. Alison) spoke of the effect of subsidies on our balance of payments. The hon. Member for Croydon, Central lauded the virtues of self-sufficiency. If I remember correctly our external trade figures, the great bulk of our imports is not of food or raw materials but of manufactured goods. It would be far easier for us to become self-sufficient in manufactured goods than to become self-sufficient in foodstuffs, for the simple reason that it is difficult to grow tea and pineapples in this country and much easier to make motor cars, refrigerators and television sets.
Another argument advanced by Opposition Members is that there are other essentials in life than food. Of course there are. There is shelter, which in various ways is subsidised. There is fuel, and it has been pointed out that increases in gas and electricity prices more than offset the effect of food subsidies in keeping food prices down.
What do Opposition Members advocate? Are they advocating that we should extend subsidies and subsidise not only food and shelter but fuel as well? There is a good case for saying that.

Mr. Dan Jones: My hon. Friend is putting his finger on the core of the truth. Not one Opposition Member has mentioned the greatest cost of all, the importation of oil. I encourage my hon. Friend to proceed with his case.

Mr. Clemitson: I am grateful to my hon. Friend. What do Opposition Members want? Do they want the elimination of subsidies or the extension of subsidies to cover other essentials? I merely ask the question.
Food forms a large element in the budget of the less well off. The less well off a person is the larger does food loom in the family budget. If one compares price increases over a range of foodstuffs one finds almost without exception that price increases are greater in the foodstuffs at the cheaper end of any group—

whether it be butter, bacon, or anything else—yet it is the cheaper items of food which the poorer members of the community tend to buy.
It is said that food subsidies are indiscriminate. They are in one sense, but there is here a point of basic principle. Should we go for a system of universal, indiscriminate benefit and offset it by clawing back in taxation from the better off, or should we adopt the alternative, constantly recommended by Opposition Members, of means-tested benefits?

Mr. Alison: On that important element of the hon. Gentleman's argument, has he noticed the policy statement of the Labour Party which pointed out that on the taxation side of the equation the scope for raising taxes nowadays to meet the extra bills he postulates lies almost exclusively in the regressive indirect field?

Mr. Clemitson: I am coming to the argument put forward by the hon. Member for Barkston Ash about financing and taxation.
The alternative constantly suggested to "indiscriminate" benefits is a form of means-tested benefits. Means-tested benefits have so many disadvantages and are so objectionable in experience and principle to so many people that we hardly need to go over the arguments. It is well known that the take-up of most means-tested benefits is not high. People have memories of means-tested benefits which cannot easily be shrugged off, and means-tested benefits are divisive.
I will listen with great interest to the Minister's comments on the question of financing. I am in favour of higher taxation. I do not subscribe to the view, the lower the taxation the better. I believe firmly that the rich should be heavily taxed—[interruption.] I am reminded of the Biblical quotation:
It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God.
Therefore, if we increase taxes on the richer members of society, at least we are doing so partly for their own good.

7.40 p.m.

Mr. Michael Neubert: If one were to go out and buttonhole a man in the street and acquaint him with the


fact that Parliament was tonight considering the expenditure of sums around the £1,700 million mark, no doubt the man in the street would feel that it was being spent on Concorde or Maplin, or at least on desirable social projects such as the development of 100,000 houses in the East London dockland, for which an investment of £1,000 million over 20 years is required. But if the man in the street were told that the purpose of the expenditure was to give a net cash benefit to the average person of between £11 and £13 per annum, or five shillings a week, he might be faintly astonished. However, that is the net effect of the provisions of the Bill.
In order to provide that assistance we have to pay a very high price indeed in terms of a nightmare of bureaucracy, of regulations, controls and restrictions. We won a victory over the decision to abandon the display of some maximum price lists, because it must be said that if the Secretary of State believes that the average shopper will go into her local shop and ask for such a list to be flourished before she buys goods, the right hon. Lady is living in a world very different from that of my own experience. Even though we may have won a partial victory on that score, there will be so much paper work involved that it will be sufficient to give the Secretary of State a ticker-tape parade down Victoria Street. She has recoiled from an army of snoopers not for its own sake but because that army is already flagging under the burden of so much consumer protection work. We have a situation in which, in order to meet desirable social ends, there is such a misconceived method of achieving it that we involve ourselves virtually in strangulation.
Another effect of the system is that subsidies tend to increase consumption. Butter consumption in 1974 rose by 82,000 tons, or by nearly 20 per cent. The right hon. Lady galloped over that point in her argument and tried to gloss over it by saying that it helped to offset the cost of imported margarine oils. No matter what interpretation she seeks to put on the figures, there is evidence of increased consumption.
It is also reported that the consumption of cheese has increased by 6½ per cent.

One's own experience tends to bear out that figure. For those who dine out, the cheeseboard comes up almost automatically bearing not exotic continental cheeses but solid English cheeses such as Wensleydale. This is not surprising since it bears a subsidy of 12p in the pound. I have no doubt that business men at lengthy lunches and tourists in increasing numbers appreciate these generous portions, but this was not the purpose of the legislation—which was to meet the needs of those in greatest need, which is a matter on which we are all agreed.
Let us look at the consumption of tea. In an earlier debate the House was assured by the Government that there is no evidence of increased tea consumption, yet the Secretary of State intervened a short while ago to say that India had welcomed her action in subsidising tea. Presumably India did not welcome her action because our tea imports will remain the same, or because they will fall but because, as a result, consumption of tea will rise.
There is another argument, which is still valid, relating to the distortion of the market over a period of time. Let us take the relationship of butter to margarine. We see that in all the capitals of Europe the price of margarine is anything from 6p to 39p per pound less than the price of butter. But that is not the case in the United Kingdom. We have a Secretary of State who acts like a latter-day charitable Marie Antoinette who takes the view "If the people cannot afford margarine, let them eat butter." At least people can now tell the difference between Stork and butter. Stork is the more expensive of the two. Such absurdities arise from the undoubtedly laudable intention of the right hon. Lady to help those who need help most, but the method by which it is achieved is fundamentally wrong.
There is a further indictment to be made of subsidies, and that is that the whole policy conceals the true nature of the situation from the public. The public are shielded from the full knowledge of inflation—a knowledge which is essential if we are to escape from our plight. So long as Government Ministers, for their own political reasons, assure the public that something is being done, people


generally will not face the serious difficulties the nation is experiencing in meeting the costs of food, housing and other essentials in the face of the rapid rate of inflation that threatens us.
What justification has been advanced for this massive expenditure and for the approach which has been taken—an approach which appears to have so many shortcomings?
The first argument is that the subsidy helps people who are most in need and assists in redistributing wealth from the better off to the less well off. However much the Minister may assert this and quote bodies outside the House in seeking statistical evidence, our own experience tends to throw great doubt on the proposition. Let us take the average family. There is little variation in the type of food consumed by people in the different income groups. [Interruption.] Some hon. Members may find this hilarious, but the fact remains that the foods which are subsidised are foods which are basic to us all. They appear on the meal-tables of every family in the land. It follows that if one is able to afford more, one is likely to eat more, and in consequence one enjoys a greater subsidy and receives more benefit.
The argument that this expenditure is to be funded through income tax has been denied by the greatest authority himself; namely, the right hon. Gentleman the Chancellor of the Exchequer. He said quite explicitly that, whatever the method of funding our operations in the House, in his Budget calucations the funding of food subsidy was not to be from income tax but through increases in VAT by imposing it on other items of consumption and also by an increase in the excise duties on beer, tobacco, wine and gambling. The items on which the Chancellor last March placed VAT were ice-cream, confectionery, soft drinks and crisps—and, whatever may be said about their nutritional value, they comprise part of the diet of ordinary families, particularly children. Those four items sound like a schoolboy's meal when he comes home to tea. Therefore, to put up the prices of those items by adding VAT and at the same time having food subsidies is counter-productive.
Similarly, it will not have escaped the attention of hon. Members opposite that pensioners—particularly male pensioners

—enjoy their beer and tobacco. Again, to put up the prices of those items is counter-productive. Bearing in mind the small net benefit that the pensioner achieves by these subsidies, these points are valid.
We cannot accept the argument that much is being achieved to redistribute wealth in this way—even if we thought that was desirable—or to help those most in need. Far from it.
The next justification might and should have been that, by the implementation of food subsidies, we as a Parliament can achieve some restraint in wage claims. It was a remarkable performance by the Secretary of State to go through her opening speech without once making that claim. Not once did she mention wage claims as a reason for food subsidies. Yet, if I may remind her—perhaps it is painful to her recollection—the Chancellor of the Exchequer, on 26th March said that:
food subsidies on this scale must be a precondition of any voluntary agreement on incomes."—[Official Report, 26th March 1974; Vol. 871, c. 298.]
That made it plain that it was part of the social contract struck between the Labour Government and the trade union movement with the intention that, if it were observed honourably by the Government, it would result in reduced wage claims. But what has been the result? Quite the contrary. The latest figures show an annual rate of 28½ per cent. in wage increases. So this sop to the social contract has not achieved the desired effect.
The Price Commission's report for the three months to November shows the serious impact of increased wages on material costs. The commission estimates that labour costs now account for about 60 per cent. of increases in general. That is the scale of the problem posed by increased wage demands.
The hon. Member for Newcastle-under-Lyme (Mr. Golding) to my mind gave the game away when he spoke of subsidies as the means of transferring income from husband to wife. Was he not, by that, implying that in families where the wife has most need of the increased income the husband was holding it back—presumably to spend on other items of domestic consumption? Could that be the explanation for the increased expenditure on gambling and the increased consumption


of beer, tobacco and wine which is not confined to one income group but may account for a wrong sense of priorities in the family budget?
The need to restrain wage increases is undoubtedly real. That is one reason why we, as a party, were prepared last October, at the General Election, to retain subsidies for the time being. If it meant that there would be some real conciliatory response from trade unions as a result of such action, any Government would welcome it. But events have sadly disillusioned us. The scale of wage increases has far outstripped the increase in the cost of living, serious though it is. Therefore, with some disappointment, we realise that that part of the Government's plan has failed and, indeed, invalidated a substantial part of the argument for subsidies.
We had a glimmering of a suspicion—the Secretary of State has obviously had to go out to eat—that the Government would like to have food subsidies on nutritional grounds. We were given the impression of the Minister, rather like Major Barbara providing a parliamentary soup kitchen, determining the kind of foods that the average family would eat. Was not that the point of selecting foods which form an important part of the family budget? Otherwise the money might be spent on other items of food which may not be so desirable.

Mr. Alan Williams: I should make it clear to the hon. Gentleman that there is no intention of predetermining nutritional values. This point has been made clear by my right hon. Friend the Secretary of State on previous occasions.

Mr. Neubert: I accept that point, of course, but I gained that impression from a remark made by the Secretary of State in her speech. I shall have to read it in the Official Report. There certainly is not an argument for believing that that is an adequate reason for this massive panoply of food subsidies.
I turn now to the real reason for food subsidies. I lack nothing in my respect for the Secretary of State's sincerity, but I believe that she is mistaken in her apparently single-minded intention to stem the tide of rapid inflation.
The hon. Member for Northampton, North (Mrs. Colquhoun) spoke about

appearing to do something for people in relation to increases in the cost of living—fighting the battle for them and with them. The hon. Lady would perform a better service for her constituents if she made plain how much the Government are fighting this battle with rubber swords and cardboard armour. It does nobody any service to give the impression that dramatic action is being taken to halt the rise in the cost of living when any acute housewife knows that the opposite is the position. The British housewife is not daft. She cannot believe, from all the talk about subsidies that she may hear in Parliament and elsewhere, on the radio and television, that anything is being done to stem the massive rise in her food bill each week.
My local paper, the Havering Recorder, runs a Shopwatch Campaign. In its latest report it points to an increase, in a fortnight, of no less than 57p on a shopping basket of 33 items. That was at the London Co-op. By comparison with an increase of that magnitude, the British housewife will feel that this help, although acceptable as any help is in times of financial difficulty, is not very much, and that it will be quickly swallowed up. Therefore, however much we may be with the Government in wishing to see some obstacle put in the way of increased prices, we do ourselves and others no good service by concealing the true picture.
I should like to leave the last but one word with the Chancellor of the Exchequer, because I feel that his statement on 12th November is worth reading in full. The hon. Member for Burnley (Mr. Jones) will appreciate this point, although he appears by his temporary absence to have missed the opportunity of hearing anyone mention the words "fuel" and "energy". The Chancellor said:
In general we must reduce and eventually remove subsidies of all kinds which distort the relative cost of different forms of energy, and which stimulate wasteful consumption. Higher energy prices will affect some people more than others. Fuel bulks large in old age pensioners' budgets. But the best way to help pensioners is to increase pensions, not to sell fuel to everybody far below its cost."—[Official Report, 12th November 1974; Vol. 881, c. 255.]
If we substitute for the two words "fuel" and "energy" in that statement the word "food", we have the classic case against the Bill. It could not have


been put better by any of my right hon. Friends.
If the Secretary of State is already convinced in her mind—she was immediately on the defensive this afternoon—that eventually subsidies must be phased out—the right hon. Lady has said that she does not wish to see them as a permanent feature of the economy—let her start now. Or, if she has indeed already embarked on this course and that is the inference to be drawn—I refer to the critical point made by my hon. Friend the Member for Barkston Ash (Mr. Alison) that the right hon. Lady, by proposing the same level of expenditure on subsidies for the ensuing period, has virtually committed herself to a reduction in real terms—let her say so.
That would be a great service for the Government and everyone else, because it would make it plain that this is an illusion—a paradise in which we can no longer live, that we must start to phase out these excessive subsidies. It would be easier to do it now than later in this Parliament as we approach another election. If the right hon. Lady does not take prompt action, she will be in a quicksand of subsidies from which she will have no hope of escape.

8.1 p.m.

Dr. M. S. Miller: I have followed with great care the interesting speech of the hon. Member for Romford (Mr. Neubert). He said that if we stopped someone in the street outside and asked how to spend this money, the last thing that person would think of would be food subsidies. That may be so in Whitehall, but not in my part of the country. It would also not be true of the people of the islands of Skye, Lewis and Harris who will benefit from these subsidies, and I commend my right hon. Friend for making this possible for the first time.
The hon. Member spoke of the situation being concealed from the public. The Government have not concealed the difficulties of our economic situation either by their pronouncements or by their actions in respect of subsidies. He also said that the ordinary housewife is no fool. She is not: she knows what the situation is.
There is a fundamental difference between charging a higher price for energy

and charging higher prices for food. If subsidies applied to energy, everyone would use it in larger amounts and the rich would benefit more. However, I could not care less whether a millionaire stuffs himself with bread, cheese and milk. Let him eat as much as he likes: he will soon get fed up with it. It is a different matter when it comes to imposing higher charges on the use of energy—although ever here, in common with some of my hon. Friends, I do not know why we should go overboard in respect of the nationalised industries and demand that they should make profits.
The hon. Gentleman also said that the daily diet of people in this country is much the same everywhere, that the daily fare is the same in working class areas as in his. I cannot believe that he is living in the same land as I. Not a very high proportion of my constituents in Blantyre eat caviare and smoked salmon. I am not suggesting that a high proportion of his constituents do either, but certainly there would be a lower proportion of relatively lavish foods in working-class areas.
Our debates often show a fundamental difference in thinking between the two sides of the House. The more difficult our situation and the greater the problem of inflation, the more reason there is for food subsidies. Our opponents abhor the thought of what they regard as a blunderbuss application. They would prefer what they euphemistically call "selectivity" but we call means-testing. In the part of the world from which I come, and no doubt from which you come, Mr. Deputy Speaker, if I can drag you into this—

Mr. Deputy Speaker (Mr. George Thomas): Order. Everyone knows that I am absolutely neutral on all these issues.

Dr. Miller: I am not casting doubt on your neutrality, Sir. I know that your part of the country is much the same as mine and that of my hon. Friend the Member for Glasgow, Queens Park (Mr. McElhone), which most of us still know as the Gorbals.
I had personal experience of the desperate means-testing days, when the establishment was known as "the means test" because working people had to undergo a degrading process before


obtaining even the pittance to which they were entitled. It raises great emotional fears in people on this side—perhaps more than it should, but memories die hard.

Mr. Bob Cryer: My hon. Friend is making a very good point. Would he not agree with me that the alternative that the Conservatives are suggesting, of means-testing, was strongly in evidence in the Housing Finance Act, and that that typified their mentality towards the mass of ordinary working people who will benefit from these subsidies?

Dr. Miller: Absolutely. I am glad that my hon. Friend has made that point. It is another indication of the fundamental cleavage between the two sides. I do not suggest that our Conservative opponents have no compassion, only that now and then it is misplaced.
One of the major reasons for the Bill is that it is in keeping with our agreement with the trade union movement over the social contract. I know that some hon. Members, particularly on the other side, are worried about the social contract—at least, I hope that they are worried, that they want it to succeed—because every little aspect is not going exactly as we should like. But this is "an ongoing process", in the jargon introduced in the House on Monday. One of the promises made by the Government in their close association with the trade union movement was to introduce food subsidies. All that we are doing is continuing them.
It has been said before but it can bear saying again that food subsidies help certain categories of people more than others—the larger families, old-age pensioners, low-wage earners. The reason is quite obvious. It is that the people in those groups spend a very much higher proportion of their income on food than people in other groups.
I had 20 years in medical practice in an industrial part of Glasgow, from 1947 to 1967, during some pretty grim postwar years. I can remember going into working-class houses in what was later to become my constituency. The staple diet was milk, bread, tea and a piece of cheese. Let us not pretend that we have become so affluent now that there is no group of people in this land of ours

who do not still have as their staple diet the items I have mentioned. There are still difficulties, and it is up to us in this House to recognise that we have a duty and an obligation to those people in our society who are in a more unfortunate category, in respect to low income, to old age or to having large families.
As I have said, I am not worried at all about the accusation that the rich man benefits also by these food subsidies. The right hon. Lady the Member for Finchley (Mrs. Thatcher), who may aspire to the seat of the Leader of the Opposition on the Front Bench, can stuff her larder with any amount of bread, butter or cheese that she likes.

Mr. Frank McElhone: Tinned goods.

Dr. Miller: She may be able to get it in tins also. I have no objections, because I know without a shadow of doubt that by far the greatest benefits of these subsidies on foodstuffs will go to those who deserve them most.
I commend my right hon. Friend the Secretary of State and my hon. Friend the Minister of State for continuing with this policy of food subsidies. If necessary, in order to ensure that the subsidies help people even more—although the hon. Member for Romford said that it did not make much difference in the weekly food bill—I would even suggest to the Minister of State the process of perhaps increasing the food subsidies so that they give even more help than they do at present.

8.12 p.m.

Mr. Geoffrey Dodsworth: I am particularly fortunate to catch your eye, Mr. Deputy Speaker. I should like to follow up some of the remarks of the hon. Member for East Kilbride (Dr. Miller) on the question of subsidies in principle. I shall address myself to that matter in due course.
I have three principal reasons for opposing the Second Reading of the Bill and for supporting the Opposition amendment. The first reason is the principle and practice of subsidies; the second is an administrative one; and the third is economic. I recollect that the Secretary of State, in moving the Second Reading, referred to her support for the temporary nature of subsidies. It occurs to me that the view


which she expresses is not shared by all her colleagues on the Government benches. It seemed that it would be useful if she had a seminar, perhaps, to explain to hon. Members of her party exactly why such subsidies should be temporary rather than permanent.
I want to give one reason why they should be temporary. That involves the practice, because the effect of subsidies is somewhat similar to trying to run down a moving escalator that is coming up. One is running after, in that sense, the prices. If one looks at the record of what has happened since the present subsidy programme began under the present Government, one gets a very interesting illustration of that. I want to refer to commodities and to dates. This will illustrate the point well enough.
The bread subsidy was introduced on 12th March. It was increased on 12th May, increased on 13th August, and increased on 10th January 1975. This is information that has been given to me by the Minister's Department. The milk subsidy was introduced on 21st March. It was increased on 1st August, and increased again after that. The butter subsidy was introduced on 1st April. It was increased subsequently, on 7th October. The cheese subsidy was introduced on 6th May. It was increased on 19th August.
I think that catalogue of introduction followed by increases is an illustration of the escalator which one cannot get off once one starts. One is running behind the prices, unfortunately, and not running ahead.
If one looks at the levels of expenditure this involves, one starts to appreciate the serious economic matter that this can be. At the beginning—the end of March—the total was estimated as £292 million for 1974–75. Going to the end of May it was £395 million. At the end of September it was £429 million. On the latest information and estimates—the Secretary of State gave another revised estimate today—it is about £550 million to £600 million. That seems to be the order of the figure. That is the order of the escalation which is involved in trying to support a subsidy system.
In those circumstances I suggest that we have here an uncontrolled mechanism.

There is a substantial measure of agreement among hon. Members on both sides of the House about the purpose we are trying to serve. There can be no real argument about that. We are trying to support and improve the standard of living of the people of this country. The only argument between us is about the proper and most effective mechanism for doing that, to which reference has already been made.
This is not an effective use of our resources. I shall come to the economic arguments, but I should like briefly to refer, secondly, to the administrative flaw, and what I regard as a continuing administrative flaw, in this type of procedure.
The Explanatory and Financial Memorandum states that Clause 1:
raises the financial ceiling on food subsidy payments to £1,200 million, with a power to increase the total to a sum not exceeding £1,700 million by order, subject to affirmative resolution.
That is from 1st April 1976. We are becoming only too familiar with the constant flow of affirmative orders, of which it is very difficult to keep track. I spent some time in the Library of the House yesterday trying to obtain a list of such orders and regulations. It is very difficult to find a consolidated list in relation to a proper control of the lending and spending powers of this House.
This Bill is yet another licence to spend—a licence to spend which we just cannot afford. Looking at the economic argument, one can see exactly why we cannot allow this licence. If we apply the tests that we ought to apply to any spending legislation—the tests of the net borrowing requirement, the trade deficit and our foreign borrowings—we find that this piece of legislation is faulty on all three counts. It increases net borrowing requirement. That is a choice open to hon. Members on both sides of the House. They can choose their social priorities. Last night the Opposition chose one particular social priority which we believe aids the economic advantage of this country and not only the earning power of the people but also their productive contribution, as opposed to an expenditure of this type, which is consumed and gone and is a matter of Government manipulation and control.
Second, it will cause our balance of trade situation to deteriorate, because


here we have a situation in which we are actually using Government money in order to make our balance of trade position worse. We are actually paying the consumer for the right to buy imported goods. It seems absolute nonsense in our present predicament to be spending taxpayers' money in order to increase the imports of commodities, although I accept that we need them. It seems foolish to be taking measures which make our trade position worse.
On that account we are making our foreign borrowing position all the more difficult to substantiate. We have a difficult credibility position in the world, and measures of this nature can only lead to our effective borrowing capacity being questioned more. In these circumstances I can see no alternative but to vote for the amendment and against the Second Reading.

8.21 p.m.

Mr. Arthur Lewis: I am sure that my opening comments will receive the unanimous support of hon. Members present. How deplorable it is that on major debates such as we are now having the Liberal benches are always empty. One can never find a Liberal Member on such occasions. I congratulate the Conservatives on their good attendance, and I say the same for my right hon. and hon. Friends.

Mr. Michael Marshall: The hon. Member is absolutely right in what he says and we support him fully. Is this absence not all the more deplorable, since the Liberal Party tabled an amendment?

Mr. Lewis: I am grateful to the hon. Member for intervening, even though he has stolen my next point. I noticed that the Liberals were all present to raise a point of order over their amendment not being called, but I believe that they knew that Mr. Speaker could not select it. After that they vanished. I do not know whether they went via subsidised transport.
I noticed also the continued absence of the Scottish nationalists. Where are they? They were going to set the place alight. I hope that my hon. Friend the Member for East Kilbride (Dr. Miller), who made an excellent speech, will tell all those who

voted for the Scottish National Party that that party was not interested in the subject of food.
I notice, too, that my great friend, whom I love dearly—the right hon. Member for Down, South (Mr. Powell)—is not here. The hon. Member for Hertfordshire, South-West (Mr. Dodsworth) may claim to have a great knowledge of economic affairs, but he is nothing compared with the right hon. Member for Down, South. Had the right hon. Gentleman been here he would have torn the hon. Member to shreds. He would have put forward his great economic philosophy.

Mr. McElhone: Is not the absence of the Scottish National Members all the more deplorable since we are debating a very important clause which affects the Highlands and Islands of Scotland? One of those islands was named after my hon. Friend the Member for Newham, North-West (Mr. Lewis). It is the Isle of Lewis.

Mr. Arthur Lewis: I agree with my hon. Friend. You, Mr. Deputy Speaker, perhaps better than most, will appreciate how important Lewis is to a debate such as this. We have dealt with Scotland and Ireland, and now we must deal with Wales. With a name like Lewis I must declare an interest. Where are the Welsh Members of the Liberal Party? In a recent debate the hon. and learned Member for Montgomery (Mr. Hooson) was extolling the virtues of the Welsh farmers. He was saying how terrible was their position, how they were starving, and how something should be done to help them. Of course, the whole of the Opposition benches unite in defence of the farmers. They do not worry about the subsidies then. It does not matter whether a farmer is rich or poor, whether he has a large farm or a small farm. Subsidy is indiscriminate. I do not argue that because farmers can afford to drive around in Rolls-Royces and Bentleys they should not have subsidies.
My hon. Friend the Member for Bolsover (Mr. Skinner), who is here for every debate, will agree with me, I am sure, that when the miners demonstrated they did not drive to the demonstrations in Rolls-Royce and Bentley cars. The farmers, however, are fortunate enough to be able to do that.
I have heard all these debates before. Along with Mr. Speaker, I first came to the House about 30 years ago—[Interruption.] I do not know why the hon. Member is laughing.

Mr. W. Benyon: I was thinking that the hon. Member has been here rather a long time.

Mr. Arthur Lewis: Yes, and the hon. Member for Buckingham (Mr. Benyon) is unlikely to imitate that achievement.
Subsidies originated during the war, when the Government wanted to unite the people who had difficulty in getting food and paying for it. It was not a Labour Government then. It was a wartime Government, led by that great Englishman, Winston Churchill, and, before him, the not-so-great Neville Chamberlain. The object of the subsidies was to have a reasonable cost for food and see that it was fairly shared out.
When it comes to food subsidies, the very rich, the reasonably rich and the comfortably-off trot out the same objection—"If you subsidise bread, butter, milk and the rest, the rich get the same benefit as the poor." But the same applies to the health service. The Tory Party opposed both the Second Reading and the Third Reading of the measure which set it up. The Conservatives' argument then was the same—that the rich could afford to pay for medical attention, forgetting that many poor people could not. I wish my hon. Friend the Member for East Kilbride (Dr. Miller) were here, because he could support from personal knowledge my assertion that many mothers could not take their children to doctors because they could not afford to pay them. Many mothers knew that their children were suffering because they could not afford the doctors' bills. Many good doctors, like my hon. Friend, used to treat poor patients without charging, but they could not all afford to do so, because the doctors were not so well off, either.
Why do the people of whom I have spoken trot out these excuses? The same things could be said of many of the handouts which are the equivalent of subsidies and which go to rich and poor alike. But if a large sum of money is involved it will come from taxation, and

those who have more will pay more. That is good. I agree with my hon. Friend the Member for East Kilbride. I do not mind the millionaire or the multimillionaire eating hundreds of loaves of bread. If he can stuff himself with bread and get the benefit of more subsidies than ordinary members of the public, good luck to him. He is paying more. Let him have it.
The hon. Member for Romford (Mr. Neubert) said "When we go out to dine, we all dine more or less alike." Where does he come from? Does he not know that the average working man does not go out to dine, unless he dines in his factory canteen? He might go to the pub and have a pint of beer and a bit of bread and cheese, which might be subsidised. I do not know where the hon. Gentleman gets his caviare from. My dockers do not get it. He said that if the dock workers were consulted we should find that they would prefer to have hundreds of thousands of houses on the dockland development. Of course they would. But it was not my right hon. Friend who stopped the development of the docks, who stopped the building of houses, who introduced the vicious Housing Finance Act; it was the hon. Gentleman's Government.
We are seeing the automatic acceptance of the idea that there is one law for the rich and one law for the poor—the "Let's treat the poor differently from the rich" attitude. I never heard any Conservative Member say a word against subsidies for Ferranti or Leyland.

Mr. Peter Hardy: Some of them voted for them.

Mr. Lewis: Of course. They do not mind lolly for the boys, provided they are their boys. [Interruption.] Does the hon. Member for Ripon (Dr. Hampson) wish to intervene?

Dr. Keith Hampson: I would much rather the hon. Gentleman sat down. Then I could make my speech.

Mr. Lewis: I am not sure that the hon. Gentleman will be called next. But I am sure that what I am saying is factually true, and that it has been proved over the years.
We must look after those who, for various reasons, cannot look after themselves very well. They may be sick or


disabled. They may have large families, or be on low incomes.
I say to the millionaires—dare I be personal and say "the millionairess"?—that if they want to show how much they are against the indiscriminate use of taxpayers' money for subsidy they can pay it back. There is a little arrangement whereby a person can send a cheque to the Treasury, asking it to put into the Consolidated Fund money equal to the amount by which that person has overdrawn his subsidies.

Mr. Dennis Skinner: On bread.

Mr. Lewis: Or anything he likes.
Occasionally one reads of a rich person leaving his money to the Treasury to reduce the National Debt. Let us have a little practical patriotism from all those hon. Members on both sides of the House who feel that they do not need the subsidies. Let those who think that it is wrong to be indiscriminate say, "From the passing of the Bill, I will not have these subsidies. Each year or each quarter, I shall pay out the amount of the subsidy I estimate I have been drawing." That is a nice way of helping the Treasury and of seeing that fairness is done.
My hon. Friend the Member for Bolsover will recollect that on previous occasions we have opposed huge salary increases for judges, generals and high civil servants, who will also benefit from subsidised food. I would prefer to pay them the extra money. However, if they feel that it is too much, they can pay it back. Many hon. Members have said that Members of Parliament do not have to take the increases they are awarded. Hon. Members do not have to draw those increases. They can pay them back.
I know that many of my hon. Friends could use to advantage an increase of £5,000 a year. I agree that such an increase would be wrong, because many Opposition Members would not need it. However, they could pay it back. That is the principle. Many hon. Members receive from the taxpayers, including myself, various sums which may or may not be entirely necessary or worthy. I accept such sums, but I do not pay them back. There is nothing to stop any hon. Mem

ber saying that he is worried about the economic situation and the workers.
We heard just now from the Opposition benches a reference to the high wages being received by the workers. Why do hon. Members always refer to wages? What about salaries? I have never heard one Opposition Member condemn high salaries of £40,000 and £50,000 which certain select people receive. Many receive more. They also benefit from subsidies and tax-free perks.

Mr. Michael Marshall: The hon. Gentleman refers to very high salaries of £40,000 and £50,000. What does a sum of that kind mean after the payment of tax?

Mr. Lewis: It means exactly the same as a miner, bricklayer or carpenter receives pro rata. If we pay a miner, bricklayer or carpenter £50,000 a year, he will willingly pay the tax. He will go to the tax office every Friday and pay it regularly under PAYE, unlike the company directors. He will use a wheelbarrow to take it there, and he will have more left that he receives in a year now. I represent 50,000 constituents. Although I have not consulted them all, I claim that any one of them would willingly draw £50,000 tomorrow. I have not worked it out, but assume that the tax is £45,000—

Mr. Skinner: It depends on the accountant.

Mr. Lewis: —he would willingly pay £45,000 tax and be left with £5,000.
My hon. Friend the Member for Bolsover referred to the accountant. I was going on to that subject. Company directors not only receive salaries of £50,000; they enjoy tax-free perks. They also benefit from subsidies at the expense of the taxpayers. The taxpayers subsidise such people for their cars, flats, cleaners, gardeners, and 101 other things. I have never heard any hon. Gentleman say that it is wrong for the ordinary taxpayer to subsidise rich company directors who are left only with a minimal amount from their £50,000, after tax. Subsidies are being paid out every hour of the day. The richer the person, the more subsidies he receives.
I am sorry that my right hon. Friend the Secretary of State has not yet returned


to the Chamber, because, although in my view she is one of our most able Ministers—we have a grand bunch of Ministers—I must criticise her on one count. I understand that she has appointed a Mr. Michael Young to head the new National Consumers' Council. I have no doubt that he is a very able man, but I have read somewhere that he is to devote only two days a week to his new job, and that he is to be paid £4,000. If that is right, it is scandalous. It represents £40 a day. I do not think that that is fair. He is a very capable man, but if we are to tell the miners that they must be careful not to ask for too much money, it cannot be right to pay anyone £40 a day, or £4,000 for a two-day week. Clearly it is a part-time job, and Mr. Young must have other jobs. I urge the Government to watch this aspect carefully.
The Explanatory Memorandum points out that the continuation of food subsidies will require no increase in the staff of 160 at present involved. That is good. But we must be careful that we do not have too highly paid civil servants doing this work. There are—dare I say it?—plenty of good Socialists who would do jobs like this for much lower pay, and do them just as efficiently and capably. Therefore, I should like to see a limit placed on that side of the administrative costs.
I hope that we shall have subsidies for a long time to come. Regardless of the complexion of the Government of the day, I do not believe that they will abolish subsidies altogether. They will try. Subsidies may go out for a time, but they will have to come back. They are the only fair way in which we can genuinely look after the interests of poorly paid people.
Whether members of the Conservative Party are scrambling for the leadership, as they are at the moment, or scrambling to get back on to the Government benches, if they propose such retrogressive measures as the abolition of food subsides I can assure them that they will never return to power.
I offer my congratulations to the Secretary of State, and I support the Bill 100 per cent.

8.44 p.m.

Dr. Keith Hampson: I am grateful to the Chair for extending a

favour to my hon. Friend the Member for Hertfordshire, South-West (Mr. Dodsworth), and I am glad that, despite that, I have not been filibustered out of the debate by the hon. Member for Newham, North-West (Mr. Lewis), who emerged from I know not what part of the House and treated as in his usual splendid and penetrating style. But apparently the hon. Gentleman does not understand that if his Government had not helped the farmers—and many of us think that they should have been helped earlier—there would have been serious food shortages which would have put up prices even more, which in turn would have in turn escalated the cost of subsidies.
Earlier today there was some dispute about the motives behind these proposals, and in most of the debate there has been a challenge to the good intentions of the Opposition towards those usually described by Government supporters as the poorer sections of the community. They say that price subsidies will give most help to the lower paid. However, the dispute is not really about that objective. It is about how best to help those sections of the community.
We have been told that there are manifest differences between the Labour and Conservative Parties, although there is not such a manifest difference between us about social justice. But the food subsidy scheme was brought in last July not just for economic reasons, to lower the food price index, but for the political reason that we were due for a General Election. It also had to do with the social contract, but it is not noticeable to any family or wage earner or trade union member that they are gaining substantial benefit to their weekly outlay. Indeed, they are not. We have been told the figures.
But what the scheme does do is prove to trade union members that this is their Government, that the Government will listen to their desires and will operate the sort of philosophy they want. We have this sort of operation so that the trade unions can know that this is their sort of Government and the Government will do what they want.
But once one steps on an escalator one keeps on going up it. In the case of food subsidies, the cost is rapidly going up. As late as 15th January the estimate for the bread subsidy was £63·4 million;


now it is up to £79 million. We are being asked to extend it still further. The enormous sum of £1,700 million is involved in the Bill. We talk about social justice, but how much better spent could be the £31 million for tea, for example? Yet we have had to scrabble with the Secretary of State for Education and Science in order to get a £1 million programme to combat adult illiteracy. If we had wished to help larger families, why could not the Government have increased family allowances?
Our hospitals are in need. I was today on a delegation about the likely decision by Ministers to cut the major hospital-building programme in Leeds, which has been on the stocks for 12 years. They are likely to cancel stage 1, which would cost £2 million. Again, we could get the cost of the abolition of the earnings rule out of the money spent on one single item of these subsidies. But, of course, so many hon. Members opposite did not have the courage of their convictions last night when it came to the vote about the earnings rule.
Many hon. Members opposite have signed an early-day motion asking that the old and the disabled—it is a noble cause—should have their telephone charges either reduced or at least saved from the massive increase in charges now proposed. Why cannot we pay for that out of the sums of money now being thrown away by the Government, whose own figures show that two-thirds of the food subsidies are going to families with an income of more than £2,000 a year?

Mr. Bob Cryer: If the hon. Gentleman is so determined to oppose food subsidies, can he tell us why the Conservative Party at the last General Election did not uneqivocally declare that it would abolish them?

Mr. Arthur Lewis: Because of votes.

Dr. Hampson: I am trying to point out to people who are so often hypocritical that here we have a very large sum of money available for social justice. I remind hon. Members that the Chancellor of the Exchequer's policy is to abolish the subsidies on the nationalised industries. The Conservative Party says that there is a place for a certain kind of subsidy, but we question whether the Gov

ernment are making the best use of the taxpayers' money by food subsidies.
One point which has emerged in the debate is the gap between the cost of margarine and the cost of butter, and it has aroused great scorn among hon. Members opposite. Do they realise—the Minister is now present—the effect? If the margarine producers and those who package it do not get a quick answer on what is to happen on the butter subsidy, people will be thrown out of work. Does not that concern hon. Members opposite? One of the two major manufacturers of margarine packaging is now entirely cutting out its night work, throwing 55 people out of work. A competitor, the Metal Box Company, is doing the same. It is reducing its work force because of uncertainty—all due to the kind of proposal coming before the House yet again.
The ramifications of what is proposed, and what we have had on the statute book since July, are very considerable and we must have answers, because once we get on the escalator it goes on, and as it goes on the confusion for manufacturers grows. Look at the waste of time in man-hours and operating costs with people trying to wend their way through the fantastic complexities of the current Price Code and other legislation we have had, and the confusion which it seems to be giving, not only to retailers and manufacturers but also to civil servants. Very shortly I will come again to a particular matter on this.
As my hon. Friends have said, surely it is most important, if we are in a grave economic crisis—which we all believe we are, a crisis so grave that most people are unaware of its full dimensions; indeed it is crucial—that we get the full impact home to them instead of this cushioning in so many directions on these key items which the public see blazoned before them in supermarkets, which lulls them into a false sense of the nature of the crisis. At the same time other Ministers are urging us to understand how grave the situation is, and to save fuel and save generally. Why do we not get a co-ordinated package on energy and the economy which will have the right psychological impact? This kind of measure is certainly undermining that.
A specific problem I want to raise whilst the Minister is here is the level


of distortion as the whole of the prices legislation becomes more and more complex. We have already heard evidence from the members of the Government that inflation in this country is now homegrown and is not coming only through imported materials. But the very legislation which is supposed to reduce prices is now so complex and cumbersome that in certain instances it is actually forcing up prices. It is home-grown with a vengeance. If one goes into supermarkets in the Leeds-Bradford area one sees this in relation to bread. So complex is the legislation and the way it operates that, as my hon. Friends have pointed out, it is hard for us as Members of the House to know how these things are being done and what they involve.
On the 19th December, suddenly, we had a Written Answer from the Under-Secretary of State in which, at great length, he explained that he was going to bring in additional controls over discounts that bakers may extend to their customers on subsidised bread. I do not claim to be any expert at all on the Price Code, but, even with all the skills of the Library, I have not been able to find out how the controls have come to pass and by what procedure they have been implemented. Is it simply by a statement in reply to a Written Question that they have been put into operation, or is it by something I have missed under an order?
Under the provisions of the Price Code larger bakers must notify changes in discount rates to the Price Commission. Surely that provision in the Price Code meant: "You must do so if you are changing your discount so that it puts up the price by offering less discount to the retailer." I have a situation in a chain of 12 very large supermarkets in the Leeds-Bradford area where the discount the baker wishes to offer the retailer is a large one and, therefore, with the retailer passing it on, customers pay a lower price for a loaf of bread. This has been the case for 14 months. But the Government, through their own crazy price control structure, are now actually forcing up the price of those loaves by refusing to allow the management—Spillers in this case—to pass on to the retailer the discount the firm wants to pass on. Because of that reply they are

being forced to keep the 35 per cent. discount down to 22½ per cent. What sort of crazy situation is this? I ask the Minister to reconsider the decision which he has notified to me in correspondence on this matter.
What the Minister has done is not within the spirit of the original intention. If he says that there is abuse, that supermarkets may be putting pressure on bakers and demanding bigger discounts and this will mean that bakers will keep coming back to the Price Commission for an increase in prices, let him take action to deal with that. I note that the answer on 19th December came only three days after the bakers had notified the Price Commission of a rise, so there was an odd coincidence in the timing. If there is abuse, the Minister ought to take action against it in another way.
If it is not that abuse which the Minister has in mind and if what he is arguing is that retailers are not passing on the discounts, again let him say so and let us know the firms that are involved. But this is not the case in the issue that I am raising. The issue that I am raising concerns Morrison supermarkets. The Department has acknowledged that there is an anomaly affecting them in the order which the Minister has printed in the Official Report. If, because of the efficiency and enterprise of a firm, the consumer is being forced to buy bread not at a lower price but at a higher figure, we are in a topsy-turvey situation.
We know that because of the way in which these supermarkets are spread about in a limited, tight geographical area and have special distribution patterns with the bakers the latter get a better deal because they achieve a level of sales from each delivery van which is almost double the average and they pass on a good discount for good commercial reasons. The Government have no idea of the working of the free market. They are intervening to such an extent and confusing the situation so much that the result is higher-priced bread for people in the Leeds and Bradford area.
I urge the Minister to reconsider the matter. The legislation allows a 15 per cent. gross profit margin to retailers. If he feels that there is a problem, why not control that? If the Minister thinks that


retailers are not passing on discounts, why not tighten up the scrutiny and make sure that the 15 per cent. figure is achieved, rather than deal with the problem in the way he proposes?
If the Minister is not prepared to do that, let him consider each individual case. As he says, his Department has scrutinised the individual case which I have brought to his attention. Can he not see that there is a need for flexibility? Or is the price legislation so confused and convoluted that it is not possible to have flexibility and exemption for an individual case where efficiency and good practice are proved to operate?

8.58 p.m.

Mr. Frank McElhone: I am aware that I have risen to speak at a rather crucial moment in the debate, but I shall be brief in the interests of the hon. Member for Gloucester (Mrs. Oppenheim) who is to conclude the debate for the Opposition. I apologise to the House for coming late into the debate, but I was elsewhere, attending to other parliamentary duties.
There have been many complaints by the Scottish National Party that food is dearer in Scotland than in other parts of the United Kingdom. I should like the Minister, even within a three-clause Bill, to come to some agreement about the possibility of regional price surveys. I do not believe that the price is higher in Scotland than in England and Wales, but I should like the Minister to consider the problem, because time and again it is used as a political argument by the SNP.
The distribution of the milk subsidy to producers rather than milk marketing boards is a departure from precedent. I understand that it is happening in certain parts of Scotland—for example, the Isles of Skye, Harris and Lewis. There are three milk marketing boards in Scotland and only one in England and Wales. I am anxious that subsidies should continue, and I am concerned that the subsidy system should be conducted as efficiently as possible. I am sorry that the hon. Member for Western Isles (Mr. Stewart) is not here. Let me make it clear that I am not against that area getting subsidies. We must consider the position of the milk marketing boards in Scotland and their strange dispensation within the normal allocation of subsidies.
I now turn to the bread subsidy. There is a great deal of distress within the Bakers' Union in Scotland, because of redundancies. That applies particularly in Glasgow. It is not generally known that the Scottish bakers use a higher-quality flour. The reason for that is that they have a different style of baking from that which is practised in England and Wales.

Mr. Dempsey: It is a higher quality.

Mr. McElhone: Yes, it is a higher quality, and that affects the price. That takes me back to my original argument. I hope that the use of a higher grade of flour will not be reflected in a higher price for a loaf of bread in Scotland than in England and Wales.
I shall be extremely brief, as I recognise the generosity of the House in allowing me to be called at this late hour. I now turn to the position of small shopkeepers. I have some experience of the retail trade. We shall soon have six different foodstuffs under subsidy or price regulation. That represents an enormous variety of food. For example, there is an enormous variety of cheese and flour. The system will become a nightmare for small shopkeepers, who are often the strength of a local community, if they are given the job of making subsidies efficient.
We must ensure that the subsidy system works efficiently. I know that the Minister has had consultations with the traders' organisations. I hope that some help will be given to the small shopkeepers. It is feared that the walls of the small shops will be covered with hundreds of price notices which the ordinary person, and particularly the pensioner, will not be able to understand. If, by virtue of community councils, or by some other means, a degree of flexibility can be introduced into the application of Clause 2 I shall be grateful.
Although I have not had a chance to speak at length, and although it may seem a courageous remark, I hope that when the Whips are considering the formation of the Committee I shall be called.

9.3 p.m.

Mrs. Sally Oppenheim: We have had an interesting debate on


what I look upon as the second instalment of the subsidy saga. It is now approximately nine and a half months since we debated the first instalment. The Government then embarked upon the policy of subsidising some foodstuffs as one of the central plans of their counter-inflation policy. As a number of my hon. Friends have said, it was one of their commitments under the social contract. Since then inflation has risen at an annual rate over the past 12 months of over 19 per cent. Last week's Price Commission's report on the last quarter shows that there are many price increases still in the pipeline. That is the very pipeline in which the Secretary of State could not see any increases only a few months ago. The result is that inflation is likely to rise even higher in the near future.
Over the past three months the annual rate of inflation has risen from 8·4 per cent. to 23 per cent. It can hardly be claimed that the legislation that we debated last year as the first instalment of the subsidy saga has been effective in any way in moderating the rate of inflation, despite the huge expenditure that has already taken place and the many hundreds of millions of pounds that have been poured into it.
Whatever effect the subsidies may have on the food index, the fact remains that only a week ago the chairman of one of the large voluntary chains demonstrated that the prices of 23 basic items of grocery have risen over the past 12 months by over 41 per cent. Only last week we had an announcement that in the first two weeks in January over 150 wholesale grocery price increases had been approved by the Price Commission. The overall effect on grocery prices—

Mr. Mike Thomas: Is the implication of what the hon. Lady is telling us that the general store has not been keeping to the voluntary agreement?

Mrs. Oppenheim: If the hon. Member listens to what I say he will learn the implications of my remarks. It is a little too early for him to prejudge the issue.
The general effect over all of industry has been slight. Even worse, the effect, despite the expenditure of hundreds of millions of pounds, has been to restrain the retail price index by a mere 1½ per cent. That has been more than counter

balanced by other price increases, some the result of the extension of VAT in the March Budget, some caused by the collapse of the social contract.
It is a little ironic that when we are debating legislation designed to extend last year's Prices Act, which abolished the Pay Code, wages should be one of the major contributory factors to inflation. This is particularly so, since the subsidies were introduced, as the right hon. Lady said, to reduce the impact of raw material price rises on product costs. The last bread subsidy was used directly to subsidise a pay increase. This is a curious change of direction in Government policy. Alas for the Government's pipe dream of yesteryear in which they thought that if they subsidised food prices and controlled those prices, wages would take care of themselves.
What has happened since the Pay Code was abolished is that hourly rates have risen at a staggering annual rate of no less than 31 per cent. The Prices Act has proved to be an expensive piece of legislation in more ways than one. Because the Pay Code was not replaced by an adequate social contract we now debate this measure against the background of record rates of inflation. There cannot be an hon. Member who is not deeply concerned about the impact of such inflation on the economy and particularly on the most vulnerable people in our economy.
Whereas average wave earners have been more than protected by pay increases, there are those on low incomes, fixed incomes and special social groups who have been severely affected. These people genuinely require help. There are far less costly, yet more effective, means of bringing that help to them than these subsidies.
The hon. Member for Northampton, North (Mrs. Colquhoun) spoke about ordinary people. I am suspicious of people who speak about ordinary people and their connections with them. My constituents are in what I would call lower-income groups, but I do not distinguish any of them as ordinary persons. I have never met one of these ordinary people. There are different types of people. They may be on low incomes. But they are not ordinary people. They are individuals, each and every one of them.
Labour Members would do well to remember that. As the Secretary of State said, quite rightly, we all too often talk of categories and of certain types of family when we should be talking about people and remembering that they are all individuals. One of the most interesting things which have emerged so far—although some of my hon. Friends have noticed this, it does not seem to have been widely noted on the Labour benches—is that the Bill represents, if not a U-turn in Government policy, then a distinct swerve.
The right hon. Lady has confirmed that this measure provides for the present level of subsidies to be maintained. If the prices of those subsidised foods were to rise in the coming year at the same rate at which they rose last year the right hon. Lady would need another £500 million to hold prices. There is little scope in this Bill for preventing future price increases, unless commodities come down. We all hope that this will happen, but I am sure that the right hon. Lady is far too sensible to introduce a piece of legislation which is based on a gamble. Here we see a clear new direction in Government policy.

Mr. Golding: Is it not true that the Bill slows the increase in prices "at a stroke"?

Mrs. Oppenheim: There is not much scope in these provisions for preventing any future price increases. To do so the right hon. Lady would have to give herself not £500 million, or £620 million, she would have to give herself £1,000 million. That is a change of direction that has been emphasised in statements made by the Minister of State to the effect that the Government's intention was to phase out food subsidies.
The right hon. Lady referred to a Written Answer she had given to my hon. Friend the Member for Barkston Ash (Mr. Alison) to the effect that when it was possible to replace food subsidies with appropriate social security benefits it would be desirable to phase them out. On that point there is no difference in direction between the two sides of the House, or at least the two Front Benches—I am not sure about the Government back benches.
However, when we talk about this change of direction I am reminded that last year, when the Government

embarked upon the subsidy course, we warned them that subsidies could not be abandoned overnight. We warned them that they could not be abandoned without continuing Government expenditure. We warned them when they incurred this huge liability that they would not be able to abandon it easily or cheaply.
That brings me to the quotations, which were not quite accurate, from our election manifesto made by several hon. Members. We said that we would keep subsidies for the time being. That is precisely what we want. It has never been possible to phase them out overnight. The right hon. Lady's recognition that they should be replaced by appropriate social security benefits is the first indication we have had about that. I welcome it, because it is an entirely new line of thought from her on this subject.
We accept this new direction but, as my hon. Friend the Member for Aylesbury (Mr. Raison) said, in a highly articulate and eloquent speech, we believe that they should be phased out. I am glad that the House finds some merriment in that. I do not want to delay, because I do not want to deprive the Minister of State of his full time in replying to the many questions he will want to answer.
We say—it is clear from our reasoned amendment and from the speech made by my hon. Friend the Member for Aylesbury—that, taking account of the marginal effectiveness of food subsidies, taking account of their cost, taking account of our economic situation and taking account of a Government borrowing requirement of more than £6,000 million, we believe that they should be phased out more quickly than the Government apparently intend, although the Public Expenditure Survey presents a slightly different picture. It appears from that that the Government intend to accelerate more sharply over the coming years than they have indicated to their own back benchers.
The figures given in the Public Expenditure Survey are: 1974–75, £526 million; 1975–76, £488 million; 1976–77, £420 million and 1977–78, £360 million. That is a fairly sharp acceleration. We do not agree that that progress is fast enough.
We have made clear our own position, but on the Government's part there is a


curious ambivalence in the social philosophy behind the change of direction. Last year, when we debated the Prices Act, and inflation was running at 15 per cent., we were told that there was an urgent social need to protect poorer families and pensioners by preventing price increases, but this year, with inflation running at more than 19 per cent. this priority seems to have faded slightly.

Mr. Dan Jones: I do not want to interrupt the hon. Lady unduly, but has she made any assessment of the extent to which the astronomical increases in oil prices have contributed to the situation?

Mrs. Oppenheim: I have very much in the forefront of my mind the Thespian contribution of the hon. Member for Burnley (Mr. Jones), and when the time comes I shall try to produce the figures for him.

Mr. Dan Jones: The time is now, dear.

Mrs. Oppenheim: I beg the hon. Gentleman to be patient, I promise him some figures.
To revert to what I was saying, with inflation running at over 19 per cent. it is now possible for the Government to sit back and say, "We do not feel it so necessary to prevent price increases." We accept all the reasons behind that attitude, but the change of emphasis must be very puzzling to the poorer families and pensioners. They could be forgiven for asking themselves, "Why was it necessary, when inflation was rising less than it is now, for prices to be prevented from rising, whereas now, when inflation is running faster, the Government say that it is not so necessary to keep prices down?"
The right hon. Lady could reply, as she would be entitled to do, "The economic situation this year is very much worse than it was last year", or she could reply, as again she would be entitled to do, "Well, the social contract has not been kept, and therefore I am entitled to diminish my contribution towards it"—or she could reply, as would be much nearer to the truth, "Well, of course, last year was an election year and this year is not". That precisely sums up the short-term, cosmetic political nature of the Labour Government's counter-inflation

package. Now that the gift wraps are off the package and everybody can see how empty the package is, we face the grim reality that over a period of nine and a half months the Government have done little or nothing to restrain inflation. It no good the Minister of State's saying, as he said at Question Time, that he is bored or depressed by constant carpings about the Government's record on inflation. Of course, we do not blame the Government for things for which they are not responsible, but they must take the responsibility for the failure of the social contract.

Mr. Cryer: It is 75 per cent. successful.

Mrs. Oppenheim: I advise the hon. Gentleman to read the report of the Price Commission. He might then take a different view. The Government must take responsibility for the fact that they told the electorate that inflation would come down and that they had policies to deal with the situation when they had not. They must take responsibility for introducing further legislation, which means massive expenditure for the minimum help.
We now have before us a Bill that is a heritage of that "phoney" election period, which involves us in further expenditure of over £1,000 million and which will put the Government on the treadmill to nowhere. That is the effect of this so-called measure of social justice.
Time and again we have argued, both in terms of social justice and social need, that the benefit of these subsidies is doubtful indeed. The right hon. Lady in her opening speech re-rehearsed a number of arguments which she has put forward on other occasions, although these were some new ingenious twists and some of the old disingenuous terms. However, in the Second Reading debate on the Finance Bill my right hon. Friend the Member for Finchley (Mrs. Thatcher) quoted most effectively from a recent publication of the Labour Economic Finance Taxation Association Report, known as LEFTA, of which the Prime Minister is President and the Chancellor of the Exchequer Vice-President. I have a further quotation from that publication which runs as follows:
Whether subsidising anything, including bread, will reduce the general level of inflation is a very moot point. Even allowing


for the importance of food prices in estimating the cost of living in present circumstances the inflationary effects of raising additional taxation seem likely to be greater than the mitigating effects of the subsidies.
The document continues:
If we subsidise prices generally, when taxation is already uncomfortably high, we do so at the almost certain risk that those with most purchasing power will get most of the benefit while the cost of the subsidies falls most heavily on the marginal taxpayer who is nowadays a fairly long way down the income scale".
That is perfectly correct. Although Ministers allow that the majority of the subsidy money goes to the better-off, they keep saying that it is the better-off who contribute most today. But that is not so. First, if all the money raised by extra direct taxation came from the better-off, which it does not, even though a larger proportion of it may come from the better-off—those earning over £60 a week, as the Minister said—I should like to wager that a very large proportion comes from those near the £60 a week level, and those people are not far above the national average wage these days.
Since time immemorial, taxes have come more from the better-off; and the better-off have not received like contribution. Therefore, why redistribute any of this taxation by means of subsidies to the better-off? Why not choose a way of using available resources so that none is redistributed to the better-off? That would be sensible.
In any case, even if the whole of the revenue raised by extra taxation were available for spending on these subsidies, which it is not, it would not make any difference whatsoever, because, with a Budget borrowing requirement of over £6,500 million, these subsidies can be paid for only by printing extra money, which is inflationary in itself.
My hon. Friend the Member for Barkston Ash posed some very interesting questions about where the money will come from. I hope that the Minister of State will be able to answer them when he concludes the debate.
Is there sufficient tax revenue to cover these subsidies? Is it coming from overseas? Is it coming from our borrowing requirement? If it is coming from our borrowing requirement, it is printing money. Let us have no more argument about who is paying for the subsidy. If

it is being paid for by printing money, it is being paid for by creating additional inflation, which hurts the very people we are trying to help.
This is a very strange sort of social justice. But the truth is that there is very little social justice in this measure, because, in terms of actual benefits to poorer families and pensioners—85p for families and 45p for pensioner couples—these amounts could have been exceeded for less than half the cost by way of a family allowance of £1 for the first child, which is selective, because of the tax clawback, but is not means-tested. We have said this in every debate that we have had on this subject. It could have been given by additional bonuses to pensioners, and it would have cost less than half the amount involved in this measure. It would still have been selective, though not so much for the pensioners.
Whether these policies should be followed in the present economic situation is a matter for further debate, but the fact remains that more help could have been provided more cheaply and discriminately than the help which has been brought by the expenditure now of over £1,000 million. Therefore, on grounds of neither cost nor selectivity can this measure be justified.
Again, as we have argued before—this is an important point of which I hope the hon. Members for Newcastle-upon-Tyne, East (Mr. Thomas) and Luton, East (Mr. Clemitson) will take note—the amount of help that can ever be given to poorer families by way of subsidies will always be limited and narrowly confined to foods which are comparatively demand-inelastic. As a result, those foods make up a very small proportion of total family spending on food. It is a larger proportion in poorer families, but it is still not a large proportion.
To give the House some idea, in the Central Statistical Survey's monthly review of figures for December we find that, for the poorer family on as low an income as £23 a week, 78 per cent. of its spending on food is not on subsidised food items. Moving up the income scale to families on between £23 and £41 a week, spending on subsidised food items is slightly less, which magnifies the right hon. Lady's answer, but proves beyond words that we can never help poorer


families by more than a very limited amount by subsidising food. This was brought out in the Minister of State's original statement that the saving on average family expenditure as a result of these food subsidies is about l¾ per cent. per head. So my hon. Friends who have argued on grounds of social justice and social priority have been right to question the wisdom and the effectiveness of the allocation of resources in this way.
The right hon. Lady said that the beauty of this policy is: that it discriminates in favour of the poor—it does not; that it helps the poor—it does not help them as much as they could have been helped in other ways; that it helps the most vulnerable most—it could never help the most vulnerable more than marginally, for the reasons that I have given. Events have already proved that these subsidies have been neither wise nor compassionate but have hung a damaging millstone of expenditure around the Government's neck and led to the inevitable spread of bureaucracy.
This brings me to the one bright spot in the Bill—the apparent belated and partial acceptance by the Secretary of State of our point about display of maximum price lists. She has not gone as far as we should have liked, but we welcome her conversion and take considerable satisfaction in having got our point home, although it has been a long, hard struggle. We wish that she had taken notice of us sooner, because that would have saved a great deal of money. Never mind—in the spirit of good will in which concessions are always received, I would make the offer to Ministers that they should feel free in these circumstances to come to us at any time for advice on these matters. We shall be only too delighted to give it to them, and we shall not charge them a penny for it.
Similarly, Clause 2(1)(b) takes account of the further points that we raised in the debate on the Prayer to which I referred, about the difficulties of enforcing profit margin control. I am not sure that the imposition of this extra paperwork, particularly on small shopkeepers, will be justified, but in any case it is doubtful whether this provision will greatly assist enforcement.
How can any order under this legislation requiring retrospective records to be

kept—it is these that would be needed for those calculations involving the base period, particularly that referred to in the cheese and butter orders, which is a period in August 1974—be enforced? How can shopkeepers be forced to show records, or to make note of records, for the only relevant period in calculating the base period, which have never been kept? So there is a serious shortcoming in the enforcement provisions still inherent in that part of the Bill.
However, the provisions in Clause 2(2) under which the right hon. Lady is given greater flexibility to make exceptions where hardship is imposed are very welcome. I hope that they will be exercised rapidly in the case of smaller and rural shopkeepers who are very hard hit by all the additional bureaucracy involved in the administration of these subsidies. The fact that this concession has become necessary highlights the sometimes intolerable burden which all the paraphernalia of regulations which is inherent in food subsidies imposes on shopkeepers and other people of that sort.
Although obviously the Under-Secretary of State who wound up the debate on the Prayer could not tell us precisely what was in the Bill, it might have been more courteous if he had told us that these matters were under active consideration in his Department.
I understand that on this occasion no less a person than the Minister of State himself is to wind up. I should like to take this opportunity of welcoming him for the first time to our deliberations on the subsidy policy. I am not sure whether his presence signifies an upgrading of the significance of this legislation or an upgrading of the need to defend it. I suspect that it is the latter.
I hope that the hon. Gentleman will answer all the important questions put by my hon. Friends and his hon. Friends and that he will be able to tell us, as my hon. Friend the Member for Aylesbury asked, what the intermediate bread subsidy, which is subsidising a pay increase at the moment, will amount to. How long is "intermediate"? When is it to be lifted? From where will the money really come for the rest of these subsidies?
The Bill represents a halting and inadequate first step—in a climb-down on the part of the Government which will have to be accelerated in the coming


months. The Opposition accept that at a time of economic crisis, economic and social priorities must vie with each other. But a balance must be struck which fulfils our social obligations as far as it is possible to do so and, at the same time, meets the national interest. We do not feel that the balance has been struck in this measure. That is why we have tabled our amendment, which I unhesitatingly recommend to the House.

9.30 p.m.

The Minister of State, Department of Prices and Consumer Protection (Mr. Alan Williams): I thank the hon. Member for Gloucester (Mrs. Oppenheim) for her welcome to me in this novel appearance on this part of the Department's work. I assure her that I am not here because of my more placatory style but purely because of the fact that immediately after this debate we have yet another debate, and that is even more technical. As my hon. Friend the Under-Secretary understands the technicalities involved and I do not, he will be dealing with that debate.
There have been various detailed questions which I shall answer, if possible, as I go along, but I want to deal with one or two points immediately. My hon. Friend the Member for Glasgow, Queen's Park (Mr. McElhone) mentioned higher flour costs in Scotland. The Department is fully conscious of this situation. We have received representations from the Scottish baking industry which are now being considered. He also referred to the need to avoid hundreds—as he put it—of bills and notices appearing on the walls of shops, particularly small shops. Indeed, this point again we have accommodated. The regulations will require only two notices, and we are even taking steps to see whether that requirement can be eased where circumstances merit it.
I hope that my hon. Friend the Member for Newcastle-upon-Tyne, East (Mr. Thomas) will excuse me and will not be too embarrassed if I say that he made an extremely valuable and constructive speech. He made one or two points about the co-operative movement. In relation to the display of information, he said that something more imaginative was needed on the part of the shops. I am sure that he is aware that in the legislation we are making no specifications about

the site, lettering, colour and so on. Firms can be as imaginative as they wish. We hope that they will exercise such imagination as will give adequate publicity.

Mr. Mike Thomas: My fear is that they might not wish.

Mr. Williams: That is a different matter. But as I understood it, my hon. Friend asked that they should be allowed to be more imaginative. However, if there is any problem, we can talk about it in detail later. It is probably more a Committee point than a Second Reading point.
My hon. Friend also raised the question of the maintenance of records of prices and margins. I should like to make clear that there is as yet no commitment as to the precise form of the information. Hon. Members on both sides of the House have made the legitimate point that there may be difficulties for some retailers. Therefore, we have ourselves built into the Bill a necessity for consultation on the exact type of record which will be needed. As in so many other cases, after consultations and after taking into account all reasonable points made, we may vary the initial requirements, but what we envisage at this stage would be information relating to buying and selling prices, margins and stock levels.
The hon. Member for Aylesbury (Mr. Raison) asked why we were not consistent and why we do not subsidise nationalised industry prices. I believe that I got his question right. The answer is, of course, that we do. We are subsidising nationalised industry prices. However, what we have said is that the subsidies will be gradually phased out.

Mr. Raison: The hon. Gentleman did not get my point, which was to ask why the Government have one policy of phasing out the subsidies for nationalised industry prices but do not have the same policy in relation to food subsidies.

Mr. Williams: It is because there are several other factors, and the fact that there are the energy conservation and the balance-of-payments aspects as far as the power industries are concerned. In addition, it is possible to order the prices of those industries in a way which is often not possible in private industry so that we can take account of social circumstances and the needs.
Many hon. Members referred to the social contract and claimed that it had failed and that it was responsible for higher prices. That is a fascinating proposition which I understand stems from the recent report from the Price Commission. May I urge hon. Members to read the whole report and not just the Press comments? The report covered the three months to the end of November, the month in which the threshold came to an end. Many of the changes in costs as the result of pay increases referred to in the report related to the Conservative Government's threshold payments. Much of the increase in wage and pay rates that took place over that period was the consequence of our having to do away with some of the harsher inequities of phases 1, 2 and 3, which had created numerous anomalies for such groups as nurses, and where we were under pressure from the Opposition to make corrections. We are having to remedy the faults of the last Government's statutory policy which ended in the three-day working week.

Mr. Richard Wainwright: Is the Minister suggesting that simply because we have gone past November we have finished with threshold agreements? Does he not agree that many unions have, perhaps rightly, secured threshold agreements in settlements which will last for many months, if not years, to come?

Mr. Williams: If the hon. Member will allow me to develop my case he will see that I am trying to be as fair as I can in my points about the wage impact. I have been absolutely objective so far, and I am sure no one can take exception to what I said.

Mrs. Sally Oppenheim: Does the Minister think that the pay claims he has been discussing would have been any lower without the thresholds?

Mr. Williams: The pay claims I referred to—namely those relating to the special cases of the nurses and so on—involved people who had been held back to such an extent that it was distorting the ability to provide certain basic services, such as hospital services. Much of the wage explosion was the inevitable and predicted consequence of eventually taking the lid off the protracted statutory pay policy. The trouble was that the

policy operated by the previous administration applied to pay but did not apply to prices, and consequently—[Interruption.] Is the hon. Member in some physical discomfort or does he want to interject?

Mr. Raison: I want to do the latter, because the Minister has induced the former by the folly of his statement. The last Government introduced the Price Code, which was the basis of the prices policy which the Government are trying ineffectively to continue.

Mr. Williams: I am grateful to the hon. Member for his helpful contribution, because from the time his Government's policy was introduced in November 1972 until the time at which it was due to expire in May 1974 the rate of inflation actually doubled. That was the effectiveness of his Government's price policy. The rate of increase in wages fell during that time so that the Government were creating a situation in which they were artificially holding the lid on, and at some time an explosion was inevitable. Last February that explosion came, and the Conservatives carry full responsibility for it.
If we exclude the special cases, 75 per cent. of workers who have settled since the end of the statutory policy—that is, some 3 million workers—have done so within the terms of the social contract. No one pretends that wage increases cannot be a factor in increasing inflation or in continuing it. Therefore, we attach the greatest importance to the TUC statement that now that the special cases are out of the way we should not anticipate future price rises as a result of pay claims.
In order to answer some of the criticisms made by the Opposition, it is helpful to remind the House what the basic purpose of the subsidy system is, because some hon. Members seem to have forgotten it. They appreciate, as anyone experienced in Government is bound to appreciate, that the national economic policy is a series of complex objectives, some of which are often pulling in different directions. For example, one wants to control prices and at the same time cut down imports of fuel.
The strategy of the Government is to attack inflation, to try to avoid massive unemployment, to cover investment and


growth, and to try to resolve the balance of payments situation. There are no "at a stroke" solutions to any of these problems. They are certainly not problems which will be disposed of in a matter of weeks or months. It is essential that in the interim period—the period in which we are all fighting, I hope, to cure these problems—we try our best to help the most needy.
There may not be any single way of helping them. It may be that a mix of different types of help is needed. Some people may need extra cash, in which case we increase pensions and social security benefits. We want avoidable costs to be avoided, so we head off rent increases. Other people may not be able to afford basic foodstuffs which they require. Therefore, we subsidise those basic foodstuffs.
The official Opposition amendment attacks the subsidy system on the ground that it is indiscriminate and extravagant, and creates distortions and shortages, and on the ground that it conceals inflation. The fascinating thing about the amendment is that it is absolutely negative and devoid of any policy. As has been true over the whole of the last 12 months, not a single constructive idea has come from the Opposition during the debate—certainly not from the official Opposition. They have argued that inflation is too high. On the other hand they have said that we should remove one of the measures which has been holding it back a little.
Let us take the Opposition's allegation that the subsidies are extravagant. I think that the figures are agreed. Expenditure for the current year is £501 million. It will be between £500 million and £600 million next year. The precise amount for next year will depend on the way prices move, as the hon. Member for Gloucester (Mrs. Oppenheim) expected, and on the level of consumption for the various goods which are subsidised. Expenditure will also depend on harvest factors. There are a great many imponderables in establishing next year's rate, but there will be £700 million available. We have a working margin in the event of any increases over and above those to which the hon. Member for Gloucester referred. During 1976–77, we shall have up to £500 million available, but only with the approval of the House. It cannot

be available before 1st April 1976, and it can be made available only by the affirmative resolution of the House.
The Opposition condemn food subsidies as extravagant. Why, then, do they not call their own £1,400 million deficit on nationalised industries extravagant? Perhaps it is a point of principle that worries them. Indeed, one hon. Member said that there was a point of principle. I find it hard to believe. After all, it was they who started the milk and butter subsidy. They introduced nationalised industries' subsidies and, indeed, subsidised the nationalised industries through most of their period in office. In its election manifesto of four months ago the Conservative Party committed itself to continuing subsidies. Today it is trying to wriggle out of that commitment. There can be very little doubt about how long that pledge would have lasted if the Conservative Party had been re-elected.
How can the Opposition argue that there is a point of principle in relation to subsidies after the statement made by the right hon. Member for Finchley (Mrs. Thatcher) about guaranteeing a 9½ per cent. mortgage, which is a bottomless pit of subsidy for the well-off? The bigger the mortgage, the wealthier the person, the better the subsidy he receives. Where is the point of principle of the Opposition against subsidy when they would introduce that—

Mrs. Sally Oppenheim: Is the hon. Gentleman describing as well-off those people who are scrimping and scraping to save enough to buy their own homes but who cannot manage it?

Mr. Williams: No. The hon. Lady knows that I am not saying that. The Opposition have spent an afternoon protesting about non-discrimination in the giving of subsidies, but they wanted to give a subsidy which would discriminate overwhelmingly in favour of the person with the biggest mortgage. They cannot say there is any point of principle to which they are committed which makes it impossible for them to accept the idea of a subsidy.
Hon. Members may feel that there was extravagance in the way the items were chosen. As we explained, we chose those items which were important in the incomes and budgets of the large and low income families. Therefore, those items


have a social importance. We chose items for which there is an inelastic demand and for which prices would not tend to fluctuate on a daily basis, such as can happen with fresh vegetables, fresh meat, fish, and eggs. The effect of the taxation measures has been to redistribute income to the low income families from the high income families. The food index is 7p in the pound lower, at a time when inflation is going ahead faster than any of us would want. Nevertheless, in the period since March last year the price index of subsidised foods has fallen by 1 per cent. It is not a matter of dragging behind other price increases. The subsidies have been effective in producing a small but nevertheless reasonable pegging of the prices of subsidised foodstuffs.

Mr. Jim Spicer: Is the hon. Gentleman saying that the cost of the production of milk has gone down in the last year? Will he say, beyond that, what in his view will be the cost of production of a pint of milk at the end of 1975 compared with the subsidised cost at which it will be sold to the individual member of the public?

Mr. Williams: The Opposition are much more willing to rally to the farm lobby than to the consumers' lobby.
I did not say that. I was speaking about prices generally. I shall deal with prices in a little more detail, time permitting.
During the period in office of the Conservative Government, as was revealed in the Low Pay Unit report, prices of necessities went up faster than the prices of luxuries and led the unit to comment that until the introduction of food subsidies and rent control early in 1974 the cost of living for the poor rose faster than everybody else's. Whatever the Opposition may feel about subsidies, those who speak on behalf of people living on low incomes feel that such people have benefited.
The impact of food prices on those with low incomes or on the large families should not be underestimated. For example, the impact on low incomes is revealed by the fact that the proportion of income spent on food by a family with an income of £20 a week is double that of a family with £60 a week. As for the impact on the large family, the family

with four children and an income of between £40 and £60 a week spends one-third of that income on food, which is 50 per cent. more than the national average of that income group.
The price movements in the subsidised foods are as follows. Bread prices have been constant throughout the period of subsidy. As for butter, there have been small increases—2½p in the price of United Kingdom butter and 4p in the price of imported butter. However, there is an important point here which I am sure hon. Members will accept. It is that we cannot undertake to head off every price increase in imported butter, otherwise the countries selling us the butter will feel that they will be able to sell it at virtually any price they choose, knowing that it will not affect relative sales in the British market. But still, despite those facts, the subsidy represents a saving on butter of 9p per 1b.

Mr. Dan Jones: My hon. Friend talks about the price of imported butter. Are we not in danger of substituting the shadow for the substance?

Mr. Williams: I hope, time permitting, to deal with my hon. Friend's fascinating and cryptic speech in a moment. In view of that, I ask him to understand if I do not deal with that intervention immediately.

Mr. McElhone: In my brief remarks a little earlier, I spoke about the impact on poorer families in Scotland. Is my hon. Friend aware that if he created a regional food price survey, people in Scotland on lower incomes would understand the benefits which this Bill will bring them?

Mr. Williams: My hon. Friend made the point in his brief speech, and I shall look at it. However, it is not entirely a matter for my Department.
I come next to the movement of cheese prices. Although there has been a 4p increase in price since May, there is still a saving of 12p per 1b. Then the price of milk has actually reduced, as have the prices of flour and tea. Therefore, we have achieved a net reduction in the index for the subsidised food prices since last March. That does not sound like extravagance in expenditure.
It was suggested by the Opposition that the Government were in danger of


creating distortions and shortages. Again, this is very hard to establish. No case has been made. The only example to which the Opposition kept referring was butter. However, the butter subsidy was not introduced by this Government. It was introduced by the previous administration, and it was done not to help the consumer but to move a "mountain". Faith may move mountains, but it took a subsidy to move the butter mountain. The Opposition now condemn us because the butter subsidy distorts the market. But it was introduced to do just that, so that is a tag which they cannot hang round the neck of this Government.
The scarcities which have arisen have not occurred in goods which are subsidised. There was the episode of scarcity of toilet rolls, during the period in office of the Conservative Government. Toilet rolls were not subsidised, but the scarcity was real. Then there was a scarcity of salt, on the basis of a rumour. That is not subsidised. Then we had the scarcity of sugar. Again, it is not subsidised. There were all the other shortages which the Conservatives created as a result of their three-day working week. Those shortages had nothing to do with subsidies. There were shortages of containers, bottles and so on during the period in which the Conservatives were in office. Nothing has come forward today to suggest that our programme has distorted the consuming pattern in subsidised foodstuffs or that it has led to scarcities.
It has also been alleged by the Opposition that subsidies are an attempt to conceal inflation. I suppose that, in so far as the subsidies are holding back prices, that twisted interpretation could be made. But when it comes to the question of concealment, I remind the House that the Conservative Government concealed the real costs of the services of the nationalised industries which the consumer was receiving. Our subsidies are open and are brought before the House for decision.

Mr. Alison: rose—

Mr. Williams: No. I have given way on many occasions and I have very little time left. Hon. Members opposite have made a series of allegations, and I am trying to answer them.
One of the allegations made about food subsidies is that they are indis

criminate. We have already pointed out that the subsidies of the nationalised industries under the Conservative Government were indiscriminate and were probably geared to help the people with higher incomes. In fairness I must admit that, at the General Election, the Opposition made it clear that they wanted to discriminate—but they wanted to do so in favour of the rich. Their mortgage proposal has been quoted as an example.
All that is in keeping with the policy of discrimination which the Conservative Government carried out. Their income tax concessions were geared to the high income earner, purchase tax was gradually run down on luxury goods, value added tax was levied at the same rate on luxury goods and on more important things. They cut back on the provision of school milk and gave the money instead to the parents with children at private schools. As my hon. Friend the Member for East Kilbride (Dr. Miller) said, we know what the Tories mean when they talk about discrimination. They mean the means test.

Mr. Raison: rose—

Mr. Williams: No.
The Conservatives also created benefits with a lower tapering point, whereby the individual had to carry the stigma of poverty in order to claim them. They have made it clear that had they regained office last October, the subsidies would no longer exist. In other words, the grocery bill of the average household would be 7p in the pound higher, butter would cost 9p a pound more, cheese 12p a pound more, and tea 8p a pound more.
We have had to deal with the full impact of the Tory threshold, oil price increases and the Tories' inflationary three-day working week. Yet the prices of the subsidised foods are down by 1 per cent. The Opposition are in no position to lecture us on inflation. The average level of inflation in their period of office rose at double the rate which prevailed under the last Labour Government. The rate of inflation the Conservatives inherited for their first three months of office in 1970 was 0·4 per cent. From them, this Government inherited a quarterly rate of 5·8 per cent. Hon. Members opposite should work that out


on an annual basis. They are in no position to lecture us. They understand nothing about inflation. They did not understand it in office and understand it even less in Opposition. They stoked inflation with their 20 per cent. devaluation, their three-day working week and their irresponsible approach to money supply by printing more money. Their failure is complete. Now we are going to carry through our policy.

Mr. Alison: rose—

Mr. Walter Harrison (Treasurer of Her Majesty's Household): rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That the amendment be made:—

The House divided: Ayes 214, Noes 281.

Division No. 80.]
AYES
[10.0 p.m.


Adley, Robert
Goodhart, Philip
Mawby, Ray


Alison, Michael
Goodhew, Victor
Maxwell-Hyslop, Robin


Amery, Rt Hon Julian
Goodlad, Alastair
Mayhew, Patrick


Atkins, Rt Hon H. (Spelthorne)
Gorst, John
Meyer, Sir Anthony


Awdry, Daniel
Gow, Ian (Eastbourne)
Miller, Hal (Bromsgrove)


Baker, Kenneth
Gower, Sir Raymond (Barry)
Mills, Peter


Benyon, W.
Grant, Anthony (Harrow C)
Miscampbell, Norman


Berry, Hon Anthony
Gray, Hamish
Mitchell, David (Basingstoke)


Biffen, John
Grieve, Percy
Moate, Roger


Biggs-Davison. John
Griffiths, Eldon
Molyneaux, James


Blaker, Peter
Grist, Ian
Monro, Hector


Boscawen, Hon Robert
Grylls, Michael
Moore, John (Croydon C)


Bowden, A. (Brighton, Kemptown)
Hall, Sir John
More, Jasper (Ludlow)


Boyson, Dr Rhodes (Brent)
Hamilton, Michael (Salisbury)
Morgan, Geraint


Bradford, Rev Robert
Hampson, Dr Keith
Morris, Michael (Northampton S)


Braine, Sir Bernard
Hannam, John
Morrison, Charles (Devizes)


Brittan, Leon
Harrison, Col. Sir Harwood (Eye)
Morrison, Peter (Chester)


Brotherton, Michael
Harvie, Anderson, Rt Hon Miss
Neave, Airey


Brown, Sir Edward (Bath)
Hastings, Stephen
Nelson, Anthony


Bryan, Sir Paul
Havers, Sir Michael
Neubert, Michael


Budgen, Nick
Hawkins, Paul
Newton, Tony


Burden, F. A.
Hayhoe, Barney
Nott, John


Butler, Adam (Bosworth)
Heath, Rt Hon Edward
Onslow, Cranley


Carlisle, Mark
Heseltine, Michael
Oppenheim, Mrs Sally


Carr, Rt Hon Robert
Hicks, Robert
Page, John (Harrow West)


Chalker, Mrs Lynda
Higgins, Terence L.
Page, Rt Hon R. Graham (Crosby)


Channon, Paul
Holland, Philip
Paisley, Rev Ian


Clark, Alan (Plymouth, Sutton)
Hordern, Peter
Parkinson, Cecil


Cockcroft, John
Howell, David (Guildford)
Pattie, Geoffrey


Cope, John
Hunt, John
Percival, Ian


Corrie, John
Hurd, Douglas
Peyton, Rt Hon John


Costain, A. P.
Hutchison, Michael Clark
Pink, R. Bonner


Craig, Rt Hon W. (Belfast E)
Irvine, Bryant Godman (Rye)
Powell, Rt Hon J. Enoch


Critchley, Julian
Irving, Charles (Cheltenham)
Price, David (Eastleigh)


Crouch, David
James, David
Prior, Rt Hon James


Crowder, F. P.
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Pym, Rt Hon Francis


Dean, Paul (N Somerset)
Jessel, Toby
Raison, Timothy


Dodsworth, Geoffrey
Jopling, Michael
Rathbone, Tim


Douglas-Hamilton, Lord James
Joseph, Rt Hon Sir Keith
Rawlinson, Rt Hon Sir Peter


Drayson, Burnaby
Kaberry, Sir Donald
Rees, Peter (Dover &amp; Deal)


du Cann, Rt Hon Edward
Kellett-Bowman, Mrs Elaine
Renton, Rt Hon Sir D. (Hunts)


Durant, Tony
Kimball, Marcus
Renton, Tim (Mid-Sussex)


Dykes, Hugh
King, Evelyn (South Dorset)
Rhys Williams, Sir Brandon


Eden, Rt Hon Sir John
Knox, David
Ridley, Hon Nicholas


Edwards, Nicholas (Pembroke)
Lamont, Norman
Rifkind, Malcolm


Elliott, Sir William
Lane, David
Rippon, Rt Hon Geoffrey


Emery, Peter
Latham, Michael (Melton)
Roberts, Wyn (Conway)


Eyre, Reginald
Lawrence, Ivan
Ross, William (Londonderry)


Fairbairn, Nicholas
Lester, Jim (Beeston)
Rossi, Hugh (Hornsey)


Farr, John
Lloyd, Ian
Rost, Peter (SE Derbyshire)


Finsberg, Geoffrey
Loveridge, John
Sainsbury, Tim


Fisher, Sir Nigel
McAdden, Sir Stephen
St. John-Stevas, Norman


Fletcher, Alex (Edinburgh N)
McCrindle, Robert
Shaw, Giles (Pudsey)


Fletcher-Cooke, Charles
Macfarlane, Neil
Shelton, William (Streatham)


Fookes, Miss Janet
MacGregor, John
Shepherd, Colin


Fowler, Norman (Sutton C'f'd)
McNair-Wilson, M. (Newbury)
Shersby, Michael


Fraser, Rt Hon H. (Stafford &amp; St)
McNair-Wilson, P. (New Forest)
Sims, Roger


Fry, Peter
Madel, David
Sinclair, Sir George


Galbraith, Hon T. G. D.
Marshall, Michael (Arundel)
Skeet, T. H. H.


Gardiner, George (Reigate)
Marten, Neil
Smith, Dudley (Warwick)


Gardner, Edward (S Fylde)
Mather, Carol
Spicer, Jim (W Dorset)


Glyn, Dr Alan
Maude, Angus
Sproat, Iain


Godber, Rt Hon Joseph
Maudling, Rt Hon Reginald
Stainton, Keith




Stanbrook, Ivor
Trotter, Neville
Wells, John


Stanley, John
Tugendhat, Christopher
Whitelaw, Rt Hon William


Steen, Anthony (Wavertree)
van Straubenzee, W. R.
Wiggin, Jerry


Stewart, Ian (Hitchin)
Viggers, Peter
Winterton, Nicholas


Stokes, John
Wakeham, John
Young, Sir G. (Ealing, Acton)


Tapsell, Peter
Walder, David (Clitheroe)



Tebbit, Norman
Walker, Rt Hon P. (Worcester)
TELLERS FOR THE AYES:


Temple-Morris, Peter
Walker-Smith, Rt Hon Sir Derek
Mr. Richard Luce and


Thatcher, Rt Hon Margaret
Warren, Kenneth
Mr. Fred Silvester.


Townsend, Cyril D.
Weatherill, Bernard





NOES


Abse, Leo
Ellis, John (Brigg &amp; Scun)
Lewis, Arthur (Newham N)


Allaun, Frank
Ellis, Tom (Wrexham)
Lewis, Ron (Carlisle)


Anderson, Donald
English, Michael
Lipton, Marcus


Archer, Peter
Evans, Gwynfor (Carmarthen)
Litterick, Tom


Armstrong, Ernest
Evans, Ioan (Aberdare)
Loyden, Eddie


Ashley, Jack
Evans, John (Newton)
Luard, Evan


Ashton, Joe
Ewing, Harry (Stirling)
Lyon, Alexander (York)


Atkins, Ronald (Preston N)
Flannery, Martin
Lyons, Edward (Bradford W)


Atkinson, Norman
Fletcher, Raymond (Ilkeston)
Mabon, Dr J. Dickson


Barnett, Guy (Greenwich)
Fletcher, Ted (Darlington)
McElhone, Frank


Barnett, Rt Hon Joel
Foot, Rt Hon Michael
MacFarquhar, Roderick


Bates, Alf
Ford, Ben
McGuire, Michael (Ince)


Bean, R. E.
Forrester, John
Mackenzie, Gregor


Benn, Rt Hon Anthony Wedgwood
Fowler, Gerald (The Wrekin)
Maclennan, Robert


Bennett, Andrew (Stockport N)
Fraser, John (Lambeth, N'w'd)
McMillan, Tom (Glasgow C)


Bidwell, Sydney
Freeson, Reginald
Madden, Max


Blenkinsop, Arthur
Garrett, John (Norwich S)
Magee, Bryan


Boardman, H.
Garrett, W. E. (Wallsend)
Mahon, Simon


Booth, Albert
George, Bruce
Marks, Kenneth


Boothroyd, Miss Betty
Ginsburg, David
Marquand, David


Bottomley, Rt Hon Arthur
Golding, John
Marshall, Dr Edmund (Goole)


Boyden, James (Bish Auck)
Gould, Bryan
Marshall, Jim (Leicester S)


Brown, Hugh D. (Provan)
Gourlay, Harry
Mason, Rt Hon Roy


Brown, Robert C. (Newcastle W)
Graham, Ted
Meacher, Michael


Brown, Ronald (Hackney S)
Grant, George (Morpeth)
Mellish, Rt Hon Robert


Buchan, Norman
Grant, John (Islington C)
Mendelson, John


Buchanan, Richard
Grocott, Bruce
Millan, Bruce


Butler, Mrs Joyce (Wood Green)
Hamilton, W. W. (Central Fife)
Miller, Dr M. S. (E. Kilbride)


Callaghan, Jim (Middleton &amp; P)
Hamling, William
Miller, Mrs Millie (Ilford N)


Campbell, Ian
Hardy, Peter
Mitchell, R. C. (Soton, Itchen)


Canavan, Dennis
Harper, Joseph
Moonman, Eric


Cant, R. B.
Harrison, Walter (Wakefield)
Morris, Alfred (Wythenshawe)


Carmichael, Neil
Hattersley, Rt Hon Roy
Morris, Charles R. (Openshaw)


Carter, Ray
Hatton, Frank
Morris, Rt Hon J. (Aberavon)


Carter-Jones, Lewis
Hayman, Mrs Helene
Moyle, Roland


Cartwright, John
Healey, Rt Hon Denis
Murray, Rt Hon Ronald King


Castle, Rt Hon Barbara
Heffer, Eric S.
Newens, Stanley


Clemitson, Ivor
Horam, John
Noble, Mike


Cocks, Michael (Bristol S)
Hoyle, Douglas (Nelson)
Oakes, Gordon


Cohen, Stanley
Huckfield, Les
Ogden, Eric


Coleman, Donald
Hughes, Rt Hon C. (Anglesey)
O'Halloran, Michael


Colquhoun, Mrs Maureen
Hughes, Mark (Durham)
O'Malley, Rt Hon Brian


Concannon, J. D.
Hughes, Robert (Aberdeen N)
Orbach, Maurice


Conlan, Bernard
Hughes, Roy (Newport)
Ovenden, John


Cook, Robin F. (Edin C)
Hunter, Adam
Owen, Dr David


Corbett, Robin
Irvine, Rt Hon Sir A. (Edge Hill)
Padley, Walter


Cox, Thomas (Tooting)
Irving, Rt Hon S. (Dartford)
Palmer, Arthur


Craigen, J. M. (Maryhill)
Jackson, Colin (Brighouse)
Park, George


Crawshaw, Richard
Jackson, Miss M. (Lincoln)
Parry, Robert


Cronin, John
Janner, Greville
Peart, Rt Hon Fred


Cryer, Bob
Jay, Rt Hon Douglas
Pendry, Tom


Cunningham, G. (Islington S)
Jeger, Mrs Lena
Perry, Ernest


Cunningham, Dr J. (Whiteh)
Jenkins, Hugh (Putney)
Phipps, Dr Colin


Dalyell, Tam
Jenkins, Rt Hon Roy (Stechford)
Prentice, Rt Hon Reg


Davidson, Arthur
John, Brynmor
Prescott, John


Davies, Bryan (Enfield N)
Johnson, James (Hull West)
Price, C. (Lewisham W)


Davies, Denzil (Llanelli)
Johnson, Walter (Derby S)
Price, William (Rugby)


Davis, Clinton (Hackney C)
Jones, Alec (Rhondda)
Radice, Giles


Deakins, Eric
Jones, Barry (East Flint)
Reid, George


Delargy, Hugh
Jones, Dan (Burnley)
Richardson, Miss Jo


Dell, Rt Hon Edmund
Judd, Frank
Roberts, Gwilym (Cannock)


Dempsey, James
Kaufman, Gerald
Robertson, John (Paisley)


Dormand, J. D.
Kerr, Russell
Roderick, Caerwyn


Douglas-Mann, Bruce
Kilroy-Silk, Robert
Rodgers, George (Chorley)


Duffy, A. E. P.
Kinnock, Neil
Rodgers, William (Stockton)


Dunn, James A.
Lambie, David
Rooker, J. W.


Dunnett, Jack
Lamborn, Harry
Roper, John


Eadie, Alex
Lamond, James
Rose, Paul B.


Edelman, Maurice
Leadbitter, Ted
Ross, Rt Hon W. (Kilmarnock)


Edge, Geoff
Lee, John
Rowlands, Ted


Edwards, Robert (Wolv SE)
Lestor, Miss Joan (Eton &amp; Slough)
Ryman, John







Sandelson, Neville
Stoddart, David
Watkins, David


Sedgemore, Brian
Stott, Roger
Watkinson, John


Selby, Harry
Strang, Gavin
Weetch, Ken


Shaw, Arnold (Ilford South)
Strauss, Rt Hon G. R.
Weitzman, David


Sheldon, Robert (Ashton-u-Lyne)
Summerskill, Hon Dr Shirley
White, James (Pollock)


Shore, Rt Hon Peter
Taylor, Mrs Ann (Bolton W)
Whitehead, Phillip


Short, Rt Hon E. (Newcasle C)
Thomas, Jeffrey (Abertillery)
Whitlock, William


Short, Mrs Renée (Wolv NE)
Thomas, Mike (Newcastle E)
Willey, Rt Hon Frederick


Silkin, Rt Hon John (Deptford)
Thomas, Ron (Bristol NW)
Williams, Alan (Swansea W)


Silkin, Rt Hon S. C. (Dulwich)
Thompson, George
Williams, Alan Lee (Hornchurch)


Sillars, James
Tierney, Sydney
Williams, Rt Hon Shirley (Hertford)


Silverman, Julius
Tinn, James
Wilson, Alexander (Hamilton)


Skinner, Dennis
Tomlinson, John
Wilson, William (Coventry SE)


Small, William
Torney, Tom
Woodall, Alec


Smith, John (N Lanarkshire)
Urwin, T. W.
Wrigglesworth, Ian


Snape, Peter
Varley, Rt Hon Eric G.
Young, David (Bolton E)


Spearing, Nigel
Wainwright, Edwin (Dearne V)
TELLERS FOR THE NOES:


Spriggs, Leslie
Walden, Brian (B'ham, L'dyw'd)
Mr. James Hamilton and


Stallard, A. W.
Walker, Harold (Doncaster)
Mr. Laurie Pavitt.


Stewart, Donald (Western Isles)
Walker, Terry (Kingswood)



Stewart, Rt Hn M. (Fulham)
Ward, Michael

Question accordingly negatived.


Main Question put forthwith, pursuant to Standing Order No. 39 (Amendment on second or third reading):


The House divided: Ayes 270, Noes 50.

Division No. 81.]
AYES
[10.12 p.m.


Abse, Leo
Cryer, Bob
Hamilton, James (Bothwell)


Allaun, Frank
Cunningham, G. (Islington S)
Hamilton, W. W. (Central Fife)


Anderson, Donald
Cunningham, Dr J. (Whiteh)
Hamling, William


Archer, Peter
Dalyell, Tam
Hardy, Peter


Armstrong, Ernest
Davidson, Arthur
Harper, Joseph


Ashley, Jack
Davies, Bryan (Enfield N)
Harrison, Walter (Wakefield)


Ashton, Joe
Davies, Denzil (Llanelli)
Hattersley, Rt Hon Roy


Atkins, Ronald (Preston N)
Davis, Clinton (Hackney C)
Hatton, Frank


Atkinson, Norman
Deakins, Eric
Hayman, Mrs Helene


Barnett, Guy (Greenwich)
Delargy, Hugh
Healey, Rt Hon Denis


Barnett, Rt Hon Joel
Dell, Rt Hon Edmund
Heffer, Eric S.


Bates, Alf
Dempsey, James
Horam, John


Bean, R. E.
Dormant, J. D.
Hoyle, Douglas (Nelson)


Benn, Rt Hon Anthony Wedgwood
Douglas-Mann, Bruce
Huckfield, Les


Bennett, Andrew (Stockport N)
Duffy, A. E. P.
Hughes, Rt Hon C. (Anglesey)


Bidwell, Sydney
Dunn, James A.
Hughes, Mark (Durham)


Blenkinsop, Arthur
Dunnett, Jack
Hughes, Robert (Aberdeen N)


Boardman, H.
Eadie, Alex
Hughes, Roy (Newport)


Booth, Albert
Edelman, Maurice
Hunter, Adam


Boothroyd, Miss Betty
Edge, Geoff
Irvine, Rt Hon Sir A. (Edge Hill)


Bottomley, Rt Hon Arthur
Edwards, Robert (Wolv SE)
Irving, Rt Hon S. (Dartford)


Boyden, James (Bish Auck)
Ellis, John (Brigg &amp; Scun)
Jackson, Colin (Brighouse)


Brown, Hugh D. (Provan)
Ellis, Tom (Wrexham)
Jackson, Miss M. (Lincoln)


Brown, Robert C. (Newcastle W)
English, Michael
Janner, Greville


Brown, Ronald (Hackney S)
Evans, Gwynfor (Carmarthen)
Jay, Rt Hon Douglas


Buchan, Norman
Evans, Ioan (Aberdare)
Jeger, Mrs Lena


Buchanan, Richard
Evans, John (Newton)
Jenkins, Hugh (Putney)


Butler, Mrs Joyce (Wood Green)
Ewing, Harry (Stirling)
Jenkins, Rt Hon Roy (Stechford)


Callaghan, Jim (Middleton &amp; P)
Flannery, Martin
John, Brynmor


Campbell, Ian
Fletcher, Raymond (Ilkeston)
Johnson, James (Hull West)


Canavan, Dennis
Fletcher, Ted (Darlington)
Johnson, Walter (Derby S)


Cant, R. B.
Foot, Rt Hon Michael
Jones, Alec (Rhondda)


Carmichael, Neil
Ford, Ben
Jones, Barry (East Flint)


Carter, Ray
Forrester, John
Jones, Dan (Burnley)


Carter-Jones, Lewis
Fowler, Gerald (The Wrekin)
Judd, Frank


Cartwright, John
Fraser, John (Lambeth, N'w'd)
Kaufman, Gerald


Castle, Rt Hon Barbara
Freeson, Reginald
Kerr, Russell


Clemitson, Ivor
Garrett, John (Norwich S)
Kilroy-Silk, Robert


Cocks, Michael (Bristol S)
Garrett, W. E. (Wallsend)
Kinnock, Neil


Cohen, Stanley
George, Bruce
Lambie, David


Coleman, Donald
Ginsburg, David
Lamborn, Harry


Colquhoun, Mrs Maureen
Golding, John
Lamond, James


Concannon, J. D.
Gould, Bryan
Leadbitter, Ted


Conlan, Bernard
Gourlay, Harry
Lee, John


Cook, Robin F. (Edin C)
Graham, Ted
Lestor, Miss Joan (Eton &amp; Slough)


Craigen, J. M. (Maryhill)
Grant, George (Morpeth)
Lewis, Arthur (Newham N)


Crawshaw, Richard
Grant, John (Islington C)
Lewis, Ron (Carlisle)


Cronin, John
Grocott, Bruce
Lipton, Marcus







Litterick, Tom
Parry, Robert
Stoddart, David


Loyden, Eddie
Peart, Rt Hon Fred
Stott, Roger


Luard, Evan
Pendry, Tom
Strang, Gavin


Lyon, Alexander (York)
Perry, Ernest
Strauss, Rt Hon G. R.


Lyons, Edward (Bradford W)
Phipps, Dr Colin
Summerskill, Hon Dr Shirley


Mabon, Dr J. Dickson
Prentice, Rt Hon Reg
Taylor, Mrs Ann (Bolton W)


McElhone, Frank
Prescott, John
Thomas, Jeffrey (Abertillery)


MacFarquhar, Roderick
Price, C. (Lewisham W)
Thomas, Mike (Newcastle E)


McGuire, Michael (Ince)
Price, William (Rugby)
Thomas, Ron (Bristol NW)


Mackenzie, Gregor
Radice, Giles
Thompson, George


Maclennan, Robert
Reid, George
Tierney, Sydney


McMillan, Tom (Glasgow C)
Richardson, Miss Jo
Tinn, James


Madden, Max
Roberts, Gwilym (Cannock)
Tomlinson, John


Magee, Bryan
Robertson, John (Paisley)
Torney, Tom


Mahon, Simon
Roderick, Caerwyn
Urwin, T. W.


Marks, Kenneth
Rodgers, George (Chorley)
Varley, Rt Hon Eric G.


Marquand, David
Rodgers, William (Stockton)
Wainwright, Edwin (Dearne V)


Marshall, Dr Edmund (Goole)
Rooker, J. W.
Walden, Brian (B'ham, L'dyw'd)


Marshall, Jim (Leicester S)
Roper, John
Walker, Harold (Doncaster)


Mason, Rt Hon Roy
Rose, Paul B.
Walker, Terry (Kingswood)


Meacher, Michael
Ross, Rt Hon W. (Kilmarnock)
Ward, Michael


Mellish, Rt Hon Robert
Rowlands, Ted
Watkins, David


Mendelson, John
Ryman, John
Watkinson, John


Millan, Bruce
Sandelson, Neville
Weetch, Ken


Miller, Dr M. S. (E. Kilbride)
Sedgemore, Brian
Weitzman, David


Miller, Mrs Millie (Ilford N)
Selby, Harry
White, James (Pollock)


Mitchell, R. C. (Soton, Itchen)
Shaw, Arnold (Ilford South)
Whitehead, Phillip


Morris, Alfred (Wythenshawe)
Sheldon, Robert (Ashton-u-Lyne)
Whitlock, William


Morris, Charles R. (Openshaw)
Shore, Rt Hon Peter
Willey, Rt Hon Frederick


Morris, Rt Hon J. (Aberavon)
Short, Rt Hon E. (Newcasle C)
Williams, Alan (Swansea W)


Moyle, Roland
Short, Mrs Renée (Wolv NE)
Williams, Alan Lee (Hornchurch)


Murray, Rt Hon Ronald King
Silkin, Rt Hon John (Deptford)
Williams, Rt Hon Shirley (Hertford)


Newens, Stanley
Silkin, Rt Hon S. C. (Dulwich)
Wilson, Alexander (Hamilton)


Noble, Mike
Sillars, James
Wilson, William (Coventry SE)


Oakes, Gordon
Silverman, Julius
Wise, Mrs Audrey


Ogden, Eric
Skinner, Dennis
Woodall, Alec


O'Halloran, Michael
Small, William
Wrigglesworth, Ian


O'Malley, Rt Hon Brian
Smith, John (N Lanarkshire)
Young, David (Bolton E)


Orbach, Maurice
Snape, Peter



Ovenden, John
Spearing, Nigel
TELLERS FOR THE AYES:


Owen, Dr David
Spriggs, Leslie



Padley, Walter
Stallard, A. W.
Mr. Thomas Cox and


Palmer, Arthur
Stewart, Donald (Western Isles)
Mr. Laurie Pavitt.


Park, George
Stewart, Rt Hn M. (Fulham)





NOES


Alison, Michael
Macfarlane, Neil
Shersby, Michael


Biffen, John
McNair-Wilson, M. (Newbury)
Sims, Roger


Biggs-Davison, John
Meyer, Sir Anthony
Spicer, Jim (W Dorset)


Brittan, Leon
Miller, Hal (Bromsgrove)
Sproat, Iain


Budgen, Nick
Moate, Roger
Stanbrook, Ivor


Carlisle, Mark
Molyneaux, James
Stewart, Ian (Hitchin)


Chalker, Mrs Lynda
Moore, John (Croydon C)
Thorpe, Rt Hon Jeremy (N Devon)


Crowder, F. P.
More, Jasper (Ludlow)
Wainwright, Richard (Colne V)


Dodsworth, Geoffrey
Morgan, Geraint
Wakeham, John


Drayson, Burnaby
Morrison, Peter (Chester)
Warren, Kenneth


Farr, John
Pardoe, John
Winterton, Nicholas


Glyn, Dr Alan
Powell, Rt Hon J. Enoch
Young, Sir G. (Ealing, Acton)


Goodhew, Victor
Price, David (Eastleigh)



Hampson, Dr Keith
Rathbone, Tim



Hooson, Emlyn
Renton, Rt Hon Sir D. (Hunts)
TELLERS FOR THE NOES:


Johnston, Russell (Inverness)
Ridley, Hon Nicholas
Mr. A. J. Beith and


Knox, David
Ross, Stephen (Isle of Wight)
Mr. David Steel.


Lawrence, Ivan
Ross, William (Londonderry)



Lester, Jim (Beeston)
Sainsbury, Tim

Question accordingly agreed to.

Bill read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

Orders of the Day — BUSINESS OF THE HOUSE

Ordered,
That the Motion relating to Ways and Means may be proceeded with at this day's sitting, though opposed, until any hour.—[Mr. Dormand.]

Orders of the Day — PRICES [MONEY]

Queen's Recommendation having been signified—

Resolved,
That for the purposes of any Act of the present Session to amend sections 1 and 2 of the Prices Act 1974, it is expedient to authorise the payment out of moneys provided by Parliament of—

(1) any increases attributable to the said Act of the present Session, not exceeding in the aggregate £1,000 million, in the sums payable out of such moneys under the said Act of 1974 for the purpose of reducing, or preventing or limiting increased in, food prices in the United Kingdom.

(2) any increases attributable to the said Act of the present Session in the administrative expenses of a Government department under the said Act of 1974 and in the sums payable under any other Act out of moneys so provided.—[Mr. Walter Harrison.]

Orders of the Day — WAYS AND MEANS

PRICES

Resolved,
That, for the purposes of any Act of the present Session to amend sections 1 and 2 of the Prices Act 1974, it is expedient to authorise any increase attributable to the provisions of the said Act of the present Session in the sums which, under the said Act of 1974, are payable to a Minister of the Crown or into the Consolidated Fund.—[Mr. Walter Harrison.]

Orders of the Day — PRICE CODE

10.22 p.m.

The Secretary of State for Prices and Consumer Protection (Mrs. Shirley Williams): I beg to move,
That the Counter-Inflation (Price Code) Order 1974 (S.I., 1974, No. 2113, a copy of which was laid before this House on 18th December, be approved.

Mr. Speaker: With this we are taking the following motion:
That the Counter-Inflation (Price Code) (Amendment) Order 1974 (S.I., 1974, No. 2158), a copy of which was laid before this House on 19th December, be approved.

Mrs. Williams: After the Price Code Order had been made and printed—and it is the revision of the Price Code that we are discussing tonight—an error in the reference to the stage 3 Price Code Order was brought to my attention. Since the stage 3 code is now to be replaced by stage 4 it seemed to me unacceptable that this should be allowed to stand uncorrected, with an opening for argument whether or not the old Price Code Order had been revoked. I mention that because the second order we are considering is purely procedural and I trust that we shall not have to debate it further beyond my explanation. I apologise to the House for the error, which was essentially a printing error, and it has now been put right.
I should like to turn to the substantial points raised by the new code and the changes I have introduced in comparison with the original stage 3 code and, in particular, those changes that have been introduced as a result of the period of consultation through which I and my Department have gone. There are three matters to which I shall refer, although I shall not speak at length because I recognise that there is not much time for debate and no doubt several hon. Members on both sides of the House will wish to take part.
The first matter on which I wish to touch is the new investment relief. Over the years Opposition Members have often spoken about the importance of investment and have said a great deal about the need to encourage it, but the truth of the matter is that the previous Price Code gave no recognition to the importance of

investment. Indeed, no provision was made in the Price Code as it stood to reflect increases in investment and new investment. I find that puzzling, and it is a marked improvement that the Price Code should now contain provision for investment relief. Two-fifths of the relief given will be linked directly to investment that actually takes place. I shall come in a moment to the system of monitoring which the Price Commission, at my instruction, has established with a view to making sure that this investment takes place. We believe it right and proper that there should be an easement of the code for firms which invest and not for firms which do not invest, and that there should be a link between the two.
We are also glad to say that in the last few weeks since the revised Price Code was published marked interest has been shown by firms in the new investment relief. We have reason to believe that this will be very substantial indeed. Investment is not a once-for-all activity. The hon. Member for Aylesbury (Mr. Raison) on 2nd December raised the very pertinent question of what the Government could do to establish the investment relief as an ongoing incentive. It was a fair question, because if a firm invests and receives relief at the rate of 17½ per cent., it needs to be sure that the relief will continue to make it worth while. The firm cannot take a gamble.
What we have done, so far as we are able within the restrictions imposed by the period through which the Counter-Inflation Act lasts—which is until the spring of 1976 only—is to make it clear that we are able to meet the hon. Gentleman's point at least to the extent of providing that firms which have raised their prices or profit margins under the investment relief may continue to hold prices at this level.
With regard to the details, we have extended the investment relief in two ways. First, we have extended relief to warehouses, these being of particular significance to the food industry and the food manufacturing industry. Secondly, after consideration, we have extended it to include industrial buildings and other plant and machinery which has been obtained under long-term leasing and hiring


arrangements or under hire-purchase agreements. This was done in response to a number of representations which were made to us by a number of firms involved in the processing industries.
What we have not done at present is to extend investment relief to cover commercial vehicles. The order books in the autumn for the export of commercial vehicles were good, and the commercial vehicles sector of the motor industry was facing the problem of delivery rather than the problem of orders for export. However, if that situation changes, and in the light of the extent to which investment relief is taken up, I repeat what I have said previously—namely, that we would be happy to consider again whether to extend investment relief in this way. But I must make it clear that the two factors which must be taken into account are the state of the export order books, and how far the investment relief is taken up in other directions.
The other point in repect of investment relief is that we have taken steps to limit the extent to which price increases can be loaded on a single product, but we have given a degree of scope because of the problems a firm may have in respect of the market in spreading increases over a wide range. Finally, we have taken some steps in respect of industries which have small price increases in currency terms, of which the newspaper industry is perhaps the best example.
I wish some of my hon. Friends had stayed for this part of the debate because there is something I should like to say to them. However, I shall have to ask them to read it in Hansard. Investment relief is closely tied to a monitoring system to make sure that it takes place. We have arranged for the Price Commission to take a further look at whether a price application could be sustained it the investment for which a firm had applied for relief did not take place. This is to be done on a rolling basis—that is to say, there will be constant monitoring of the situation on a quarterly basis.

Mr. Mike Thomas: I want to assure my right hon. Friend that I have heard every word.

Mrs. Williams: Some of my hon. Friends—not my hon. Friend the Member for Newcastle-upon-Tyne, East (Mr. Thomas)—have argued that they do not believe that the investment relief through the Price Code is a proper way of doing it. I urge two propositions upon them.
The first is that any Government would be irresponsible if they did not take steps at this time in our economic cycle to encourage investment in future growth. They should try, as far as possible, to break out of the straitjacket which has time and again afflicted British industry under both Governments. They should do this by ensuring that capacity is not increased in a period of less economic activity. When the period of economic activity improves, they should not immediately run into restraint of capacity in terms of both plant and machinery and skilled men and women. I believe that we should take the opportunity—a sad opportunity—of a period of less activity and of some redundancies not to allow this to happen but to try to use it to break out of this restraint on a long-term basis.
Another thing that I would have said to my hon. Friends had they still been here, and will say to them through Hansard, is that the link between investment and prices is not a bad way of attempting what I think would be the best use of a planning agreement; that is, to relax the Price Code where firms are determined to get growth.
I turn next to the productivity deduction. Hon. Members will know that there has been pressure for a still greater cut in the productivity deduction than the one that we have made. We have not been able to meet this pressure fully. Indeed, we would not think it right to do so, because we could not accept the complete removal of the productivity deduction at a time when pressures on costs are still great.
We have endeavoured to meet some of the points made to us by introducing a transitional rate. This transitional rate applies to firms which made wage settlements prior to 1st November 1974, on which date the revised code came into force. We recognise that some wage settlements fell due in September and October. Therefore, it is not fair to penalise them to the extent of 50 per


cent. for what might be a year, or even longer, because they had traditional dates for wage settlements.
We have tried to meet these points by bringing in a transitional rate of 35 per cent., which is set midway between the 50 per cent. that they believed they would have to pay and the 20 per cent. that those who had wage settlements after 1st November have had to pay. This has been welcomed by firms in that position.
Another point about the productivity deduction concerns the sliding scale. By that I mean the higher productivity deduction for firms with a high capital intensivity. I would not argue the case for this over a long period. Indeed, I do not think that it would be proper to do so, because capital intensive industries are among the most rapidly growing of our industries and, therefore, most likely to have to carry the weight of this country's export and economic growth over the next decade or so. But in the immediate situation the problem that above all faces us is that of redundancy and unemployment. Therefore, I think it proper to provide for a lower rate of productivity deduction for firms whose labour costs form a substantial part of the whole. Incidentally, these firms are often in the low-paid sector—textiles, some of the food industries, and so on. They are not, by and large, to be compared with the higher-paid industries which are typically capital intensive, such as oil refining and chemicals.
I turn now to the safeguards. Throughout I have made it clear that I do not believe that a régime of safeguards is the prime use of a Price Code. Indeed, the worry is that safeguards make no distinction between the well- and the ill-managed, the efficient and the inefficient, those with good and effective labour relations and those with bad labour relations. Safeguards in the end are a licence to survive to good, bad, competitive or uncompetitive companies.
So we have tried not to invoke the régime of safeguards too much and, therefore, have put the weight of our reliefs on investment relief and the productivity deduction. Nevertheless, one cannot completely remove the safeguards in the old code, so we have done two things in addition to what I said when we

were discussing the original consultative document.
First, we have responded to the desire of industry to be offered one or other of the safeguards. The first is the original stage 3 safeguard which allowed a firm to retain 90 per cent. of its profit margin but only in relation to erosions created by the Price Code itself. As an alternative, we have offered firms a new safeguard under which they are protected if there is an erosion of their profit margins of about one-third, although this may arise from any cause whatsoever—that is to say, it does not have to be shown to be entirely due to the Price Code.
Those hon. Members who are interested in, and indeed understand—God help them—the intricacies of the Price Code will know, as I do, that it has often been very difficult for a firm to prove that the erosion flows from the Price Code rather than from some other cause. Indeed, it would require a theologian of the level of the thirteenth century canon lawyers to be able to establish invariably the source of the erosion of profits.
So we have introduced, now slightly conceded to 30 per cent., a fresh alternative safeguard and, therefore, a firm may select which of the two it believes more relevant to it. But that firm must make a choice once and for all. There is no other possibility; indeed, the only way that we could introduce an option was on the understanding that there must be one choice and that that choice must be for the remainder of the period of the Counter-Inflation Act. Anything else would create impossible administrative and bureaucratic difficulties.
My other point on safeguards is on that which applies to distributors. Here we have agreed that retail distributors may go up to a limit of 105 per cent. of the gross margins to achieve a net profit margin safeguard, which has now been set at 80 per cent. Therefore, the gross margin has been loosened for purposes only of achieving a net profit safeguard, because it was pointed out to us—although it is not strictly true—that many firms believe that if they once reached the gross reference margin level they would have to fall below their safeguard level and would be playing a sort of somersault and leapfrog mixed up one


with another. This was not, in fact, so, but many firms believe it to be the case, and so we have tried to simplify this very complicated section of the Price Code.
I should like to mention one or two other essential changes in the criteria under which the Price Commission will deal with applications from nationalised industries. These are in paragraphs 98 to 105 of the new code and they are, of course, in line with the Government's desire to put nationalised industries increasingly on the same basis as private industry in the matter of controls and constraints.
However, it would be impossible in a short period to bring nationalised industries away from the subsidy situation that we discussed earlier. Consequently, Ministers will still have the power within the difference between the absolutely basic covering of costs and the maximum allowed under the Price Code—that is to say, the 10 per cent. on investment of capital or the 2 per cent. on turnover—to exercise their powers. But at least the range is now basically the same for nationalised industries as for private industry, and we believe that this should be commended by those who essentially want a proper relationship between the public and private sectors.
I am not besotted or enamoured of Price Codes. In many ways, they are complicated bureaucratic expressions. We have done our best with the Price Code that we inherited because, as most fair-minded Members will recognise, it would have been impossible simply to sweep it away when inflationary pressures were what they have been over the last couple of years. Indeed, we are bound to look at the American experience, which was the experience of a very sudden leap when they removed their price controls.
In saying this, I do not mean—as some Opposition Members will wish I meant—that I am totally opposed to any form of price control. I am not. I simply do not feel that the elaborate system of the Price Code is necessarily the most effective way to create dialogue on the whole question of prices, investment, growth and all the rest. I myself, in many ways, would prefer the French system, which, although in some respects rather crude, has operated effectively in terms of growth and not too ineffectively in terms

of prices. As we move towards the system of planning agreements—industry ought not to be as frightened or suspicious about these planning agreements as some are—we shall be able to provide a better answer to the problems which beset economies such as ours.
I commend this Price Code to the House on the simple basis that at long last it recognises the need for investment, that this should always have been a basic feature of it, and that it is at least an attempt to meet what are the real problems of indusry, on both sides—trade unions and employers. When firms are threatened with growing redundancies, with problems about the cash to keep themselves viable and going, we have made at least some contribution, I hope, towards what I regard as the essential 'job of trying to avoid a recession deeper than it otherwise needs to be.

10.41 p.m.

Mr. Timothy Raison: I share the Secretary of State's regret, though not her embarrassment, about the lack of Labour back-bench Members on her side of the House—with the exception of the hon. Member for Newcastle upon Tyne, East (Mr. Thomas).
The Secretary of State quoted the thirteenth century canon lawyers. I have a suspicion that those lawyers and theologians, if alive today, would not have had to exercise themselves very much about their favourite question—how many Labour back benchers can one get on the head of a pin. They would see remarkably few.
Clearly, the new code gives some overall improvement on the previous code. Because it is an improvement, we shall not oppose it. Not merely do we say that the code represents an improvement, but we welcome the concessions which have been made since the draft code was debated in the House a few weeks ago. The fact remains, however, that in some respects the changes do not go far enough. I shall return to that matter shortly. I want, first to make some general comments on the code.
There are two lines of objection to the code. The first is that it is screwing industry down at a time when in some cases it is in desperate need of greater profitability. The second is that the


code is increasingly irrelevant, as competition is anyway holding prices below permitted levels. On the face of it, those two objections are contradictory criticisms of the code. But both can be true at the same time, because these lines of attack apply to different areas.
One of the difficulties is that one cannot generalise all that easily about the effects of the code. They vary from industry to industry. Nevertheless, one generalisation is very true—that is that the economic situation is very different to that pertaining when the code was launched by the Conservative Government. Then, the truth is that prices were making all the running, with profits and commodity prices contributing. Today, the pressure is coming overwhelmingly from pay and wages. Goodness knows, prices are high enough at present, with the December retail price index up by 19·1 per cent. over the previous year. The Government have failed clearly and disastrously to fulfil their pre-election claims. But it is neither raw material costs nor profits which are responsible for the present upsurge. It is labour costs.
The latest Price Commission report, which is an extremely interesting and important document, tells this story very clearly indeed when it states on page 4:
we estimate that, in the three months to November, increased labour costs would have accounted, not for 33 per cent. of price increases, but for 60 per cent.
The problem is certainly not high profits. The commission is again specific. It says:
In the third quarter of 1974, profit margins of Category I companies have fallen to 51 per cent. of reference levels.
Even if oil is excluded—there are special factors resulting in a loss in the oil sector—the figure is still only 60 per cent. Experience with category 2 manufacturing and service companies is much the same, the third quarter figure being 54 per cent. only. There is one more highly relevant quotation:
Now that output is no longer rising, profit margins are falling and the effect of the price control is to push them down even faster.
Thus the picture is now of pay racing ahead with the Chancellor's claim that inflation can be down to 10 per cent. this year and into single figures next year looking more and more of a mirage.
The question is whether the code is the right way of dealing with this problem. In these circumstances there is a temptation for the Government to try to use the Price Code as a way of keeping down wages. The Secretary of State's notorious threat last year of introducing penalties through the productivity deduction system illustrates this. I am glad that this idea does not appear in the revised code. I should be grateful for an assurance from the Minister, however, that we shall not see this idea resurrected in a future code.
It is grossly unfair to industry to make management responsible for the weaknesses in the social contract. That seems quite unacceptable quite apart from the fact that anything of this sort would be incredibly complicated and all too liable to be extremely arbitrary. It is hard, if not impossible to reconcile the notion of penalties with the notion of voluntary incomes policy to which the Government are said to be attached.
The Government must look to other ways of dealing with income inflation. Even at 20 per cent., increased wages and falling production mean that the productivity deduction is now inflicting greater hardship than did the old 50 per cent. deduction when it was first introduced in happier economic circumstances. I have some sympathy with the point put to the Secretary of State at a dinner in Birmingham on Tuesday that the deduction should now go.
The Secretary of State raised the question of investment relief. I welcome what she said. This relief is capable of being a help. I see the point about the law expiring in 1976, but the Secretary of State's undertaking was valuable. However, the general liquidity crisis means that many companies have been obliged to cut back their investment programmes and are unable to take advantage of this provision. The investment situation is still very serious.
Next I wish to deal with inflation accounting. It still seems anomalous that calculations on a replacement cost basis should be permitted for taxation purposes but not generally for the purposes of the code. I hope that when the Sandilands report comes out the Government will be able to take it into account


in respect of prices as well as on the general question of taxation.
When the Secretary of State reexamines the code, I hope she will bear in mind that there is a good deal in the view that the quarterly assessment of the performance of businesses as regards gross and net margins should be changed to an annual assessment except in special circumstances. Many businesses fluctuate with the seasons, and that presents a problem for them.
These points must be taken into account if and when we have another draft of the code, but increasingly we may be moving towards the position in which the code is no longer effective or desirable except maybe as a piece of politics in connection with the social contract. A comparison of the successive Price Commission reports shows that overall its impact is diminishing. Perhaps even more telling than the quarterly documents is the commission's comment on page 20 of its latest report that
competitive position, consumer resistance and other economic factors have in general prevented distributors from increasing their prices sufficiently to maintain their margins.
After all, distribution is an area where there has been greatest concern and what has been said there is of very great importance.
What we want at the very least is assurances that the Government, with the commission's aid, will closely watch for signs of the point when the code ceases to hold down prices, and perhaps even tends to bring them up, as could happen in a recession. We hope that the Government will accept the need to do that, and that they will not be swayed by general political considerations.
We shall not oppose the new code, as it is a step in the right direction, and we do not want to see the previous code kept in being. But—like the Secretary of State, I think—we look forward to the day when we can say "Goodbye" to the whole notion.

10.50 p.m.

Mr. Tim Sainsbury: I first declare an interest, as a director of J. Sainsbury Ltd. and other companies. It will perhaps not be surprising if, having declared that interest, I say that I want

to speak particularly about distribution as it is affected by the Price Code.
Before doing so, I should like to make a few more general remarks, particularly to follow up the Secretary of State's excellent statement explaining why we should not have a price code at all. I congratulate her upon a fine exposition of some of the many disadvantages that flow from the operation of a price code such as we now have. There are certain special factors that deserve to be brought out a little more than even the Secretary of State has so far succeeded in doing, ably assisted by my hon. Friend the Member for Aylesbury (Mr. Raison).
We are at stage 4, and the whole shooting match is not yet two years old. It is rather depressing that we have already reached that stage. The emphasis that is rightly being given to investment is very relevant, because the longer one runs a price code that is related to a base date—and it must necessarily be related to a base date—the greater the distortions, disturbances and distractions one introduces into the whole operation of commerce and industry. The longer one operates a price code that refers back more than a year—nearly two years in this case—the more likely it is that one is looking back to a period that is not relevant to circumstances today, and therefore the more likely it is that any encouragement one tries to give to investment will be defeated by the problems posed by the reference periods to which the code refers.
The base date for manufacturing industry unit costs—30th April 1973—is nearly two years ago. For distribution it is even worse. I am sure that the Under-Secretary is well aware that there are already anomalies in the very idea of having reference back to a year that ended on or before 30th April 1973, which could cover a wide variety of periods. We are looking back all the time, when we should be looking forward. Changing circumstances make that backward glance less and less appropriate to the current climate.
With regard to the relative movement of costs, my hon. Friend has already referred to the movement of wage costs, but they are not the only costs that are now changing rather differently as compared with the pattern of movement two years ago. Fuel costs are another example. It


is a question not only of the relative movement of costs but of the rate of movement of costs. We are in a period in which, unhappily, costs are likely to increase at perhaps 2 per cent. a month, or even more in some areas. Managers need to respond quickly to the changing circumstances in which they find their production going on. That is the second point which can be raised against the whole Price Code. The first aspect is the inevitable way it must refer back to a previous period. The second is the frequency of price increases.
In a period such as this it is almost unacceptable to industry that price increases are not allowed except under very special circumstances, and not more frequently than every 13 weeks. It is very difficult for managers, who are trained to respond quickly to be prevented from responding quickly to changing circumstances. This is one of the unreasonable aspects left in the Price Code which the Secretary of State could quite easily have changed. I hope that the Secretary of State will give early consideration to such a change if, as I fear, we reach stage 5.
There is a third aspect of the operation of the Price Code which I find profoundly disturbing. I refer to the amount of management time inevitably involved in the endless negotiations and correspondence. Most of us complain about the inadequacies of management, which can be exaggerated. We agree that there is no abundant, over-supply of good management in British industry and commerce. Therefore we want to do our best to enable the management to be deployed as effectively as possible.
The Report of the Price Commission for the period 1st September to 30th November 1974 says that there were 696 staff employed in the Commission. I am sure that the Secretary of State will agree that many of them are able people. I do not know whether she agrees that they should be more effectively deployed in actual production, distribution and commerce. However, I would hazard a guess that there are many more people such as cost accountants and others with financial training, who are difficult to find, who are employed to deal with the Price Commission on all the fiddling little bits.
Appendix 3D on page 55 of the Price Commission Report states the exciting achievement of the Price Commission,

which managed to reduce an application of Phillips Electrical Ltd. for an increase in the price of Ultraphil health lamps. Phillips Electrical Ltd. asked for a 7·70 per cent. increase. After doubtless long negotiations, involving many senior managers, that figure was reduced to 7·69 per cent.
However, the Commission did not rest there. F. A. Power Ltd. wanted to increase the price of bright steel products by 6·91 per cent. A slashing reduction to 6·88 per cent. resulted from the long, tedious negotiations. Then, to prove that the decimal point was floating on the calculators, we move down to Smedley-HP Foods Ltd., who wished to increase the price of canned meat pies and pasta products by 12·326 per cent. As a result of doubtless prolonged and interesting argument, the price rise was reduced to 12·029 per cent., which was again a triumph for the Price Commission. There must have been an appalling waste of management time and expertise in industry, commerce and the Price Commission. I do not think that we can regard that as a great achievement of the Price Code.
There are special problems in distribution. In view of the range of products stocked by the average store, obviously it would be impractical to try to control prices product by product in that store. Therefore, understandably and sensibly, the Price Code from the beginning has exercised control over distribution by controlling the margins of distributors.
Immediately we run into the problem to which my hon. Friend the Member for Aylesbury referred. The margins are checked by reference a long way back to the year ending on or before 30th April 1973, and the performance of the distributive company is checked against that annual margin. But is it necessary to wait a year? Has it to be done monthly, or quarterly? How is account to be taken of the very large seasonal variations and fluctuations found in all sections of the distributive trades?
It is obviously wrong to do it on a quarterly basis. The only reasonable basis would be annual, or a moving annual total. That in itself is a problem because of the long period required to get a reliable indicator of one year against another.
That is not the only problem which arises in the distributive trades. We have


the gross margin and the net margin. It is curious in a way that the Price Code should need to refer in any way to the net margin of the distributive trades. After all, it is the consumer about whom we must be concerned. The consumer is interested only in the gross margin. It is the product cost plus the gross margin which represents the cost to the consumer. If we are trying to control the cost to the consumer, we are concerned with the gross margin. To some extent, the net margin is academic. Yet, inevitably, because the Price Code leads to complications, the net margin is also involved.
I need go no further in search of support for that than this most helpful report of the Price Commission. There, I find what results. There is a clear and, for once, unequivocal statement:
The present safeguard is not easy to operate.
The right hon. Lady rightly and fairly described the inadequacies of safeguards She described them as "a licence to survive" for the good, the bad and the indifferent. I am not sure that I wish to produce licences to survive for the bad, and it is a dubious proposition to produce them for the indifferent. Surely we should be concerned about producing licences to thrive for the efficient, and I do not think that the present Price Code, with its safety nets and safeguards, does that.
The price to the consumer is not helped by controlling the net margin, and there is no doubt that the complication that has been introduced by controlling the net margin turns out to be a disincentive to the efficient. It is not a satisfactory state of affairs that we end up like that.
Then there is a further major criticism, made fairly by my hon. Friend the Member for Aylesbury, that it can be argued—and there is clear evidence for it in the report of the Price Commission—that competition is doing a far more effective job than the Price Code. It can be argued that the Price Code is a disincentive to investment. But, as my hon. Friend said, the truth lies in that both apply in different areas of industry and commerce. In some areas it is competition and in others it is the disincentive effect to investment which is introduced by the Price Code.
Again this report is clear on this point. It says, on page 5, paragraph 2.6:

The price control has lopped the top off the current wave. Now that profits are on the downward slope, the price control inevitably pushes them down faster.
Surely there could not be a clearer statement of disincentive to invest which is representative of that sort of effect of the Price Code, direct and indirect in the sense that from management to industry to investor that must take away his incentive. We can have little doubt that in the distribution side one does not need the Price Code. Cost is doing the job. Table 6 on page 18 tells the whole story.
I would conclude by fearing that we may have a stage 5. The best stage 5 for industry and commerce would be one which tore up the whole thing. That would restore confidence and would be the best incentive to invest throughout industry which one could have at this time, but if we have to have a stage 5 not tearing up the whole thing, would it be possible to have one which was simpler, taking less management time, concerned only with the key areas, which leaves the natural forces of market place and competition to do the job in the other areas? If we had one like that it would meet the objective of all of us in giving greater encouragement to investment.

11.07 p.m.

Mr. Hal Miller: As a novice, it is with trepidation that I enter the arena with all those who discuss the Price Code, and I do so only because of the charm and clarity of exposition of the Secretary of State.
I should like to join issue with the right hon. Lady on the question of the exclusion of road vehicles from the investment relief which is otherwise so much welcomed, and rightly welcomed, on this side of the House. We are grateful to her for that.
It is not clear to me what exact figure she had in mind when she said that it had not been found possible to offer relief for commercial vehicles on account of the pressure on their order books and their supply position.
I fear that it is possible, if the right hon. Lady could cast her mind back to the figures to which she was referring, that she might find that they were of


rather earlier date than she had been led to suppose. Could the Under-Secretary offer some hope, when he replies, that the point will be re-examined, because on the industry's own forecast, this year there is to be a further decline in total production, although the industry is, of course, hoping to increase exports. In this connection, I should like to pay tribute to the magnificent export achievements of the motor industry during the past 12 months.
There is another small point. I noticed that the Secretary of State referred only to commercial vehicles, both on 2nd December and tonight, whereas the exclusion is in terms of all road vehicles, and it is in those terms that I hope that the position will be alleviated. I hope that the Under-Secretary will say that there is to be a re-examination.
The Secretary of State rather trailed her cape—and I hope I am not being a bull in a china shop, if I may mix my metaphors—when she suggested that the theology of planning agreements, whichever divine article it is, is to be reinforced or made operative by the relaxation of the Price Code for these adoptive agreements. This suggestion has been made before, and I have referred to it before in this House, but it has perhaps escaped the close attention of the right hon. Lady in her close reading of Hansard when she has not been able to be present.
Let us consider the motor industry as an example. Suppose the Ford Motor Company did not wish to comply with a planning agreement—as is conceivable—whereas BLMC might be willing to do so. If the latter were allowed to raise its prices, what would be likely to happen? The only result would be that the Ford Motor Company would prosper mightily by selling many more cars than BLMC. It would be selling at the prosperous end of its product, and the results would not be those which the right hon. Lady fondly imagines. That is one reasons why planning agreements cause so much concern.

Mrs. Shirley Williams: I think the hon. Gentleman's apprehension arises from the fact that he regards the planning agreement as the theology, whereas it is the Price Code that is the theology. The planning agreement is simply good sense.

Mr. Miller: I had tried to show that the right hon. Lady's suggestion was far from sensible, whether or not it was theological, because it was not likely to achieve what she intended.

11.11 p.m.

Mr. Adam Butler: I shall not make general comments on the code or the matter before us, because time is short. I shall not be tempted to discuss the desirability or otherwise of the Price Code, except to note some of the views which have been expressed by my hon. Friends that, in the present economic climate, there is no doubt but that some of industries' liquidity problems result from the restriction of the code as it effects them.
I want to deal briefly with one comparatively small but nevertheless important point. I welcome the investment relief which the code provides, but does this include investment in takeovers? The right hon. Lady will see what I mean as I develop my argument.
In one respect at least this mark 4 code appears to continue to work strongly against improvement in business efficiency. I need not argue how efficiency leads to lower costs and possibly smaller increases in prices, because that obviously commends itself to the right hon. Lady as it does to us all.
What I have in mind are takeovers or mergers which lead to the amalgamation of two separately-owned enterprises which are in the same line of business and with the same or similar type of product. The two broad instances of this are, first, the takeover of the inefficient firm which may be about to go out of business—and there is the important related point about redundancies which may be avoided, but that is not the main theme. Secondly, there is the takeover or merger by a business with one of comparable efficiency from which, amongst other things, the benefits of rationalisation and cost-saving flow.
As I understand it—and I hope there will be an opportunity for the Minister to comment on this tonight or to write to me; I am in correspondence with the Department on a particular issue concerning a company in my constituency—the code requires the aggregation of losses and profits of these two companies which are


to be amalgamated, and the use of aggregated reference levels.
In the first case of the takeover of the inefficient firm, one will be putting together perhaps a high reference level from the company doing the taking over and a low reference level from the inefficient company, and the averaging out reduces the reference level which the amalgamated business has to use in future.
Equally, if two comparatively efficient firms are getting together the lower reference level of one of the companies must bring down the average, and this can have a serious effect on the intentions of the company—and therefore its investment—which is considering merging with or buying up the other company. In practice what can happen is that the merger does not go through.
As the right hon. Lady has said, there is the alternative of using the reference level of the inefficient company and of using the level of a 10 per cent. return on capital employed. The right hon. Lady referred to that alternative in the context of the nationalised industries. I think that most of us would be happy if all or most of the nationalised industries showed a return of 10 per cent. on capital. In the private sector—this applies even in times of low interest rates—that is usually an inadequate return. At present when borrowing is taking place from Finance for Industry at 16 per cent., for example, a 10 per cent. return on capital is nonsensical. There is no incentive in that alternative.
One argument might be to increase the reference levels. The ideal would be that the reference level used should be that of the efficient taking-over company. It might be argued that that would allow the company to raise its prices. If I understand matters correctly there would be a check on that through one of the provisions of the code. A price increase could not come about unless there was a cost increase if the standard criteria were used to justify it. I do not think that that argument stands whether we have a mark 5 code or whether, hopefully, we are able to get away from this business in the near future.
I ask the right Hon. Lady to use the provisions of Article 76, which is headed

Modification of reference level
in the sort of cases to which I am referring. The article gives three situations as examples and I think that what I have said fits into all or most of them. The first example is
a substantial reconstruction of the enterprise
That surely results from a merger or takeover of another company.
The second example is
a substantial change in the character of the business;
I would submit if a business changes substantially in size that would be a
substantial change in … character …
Another point which involves investment and particularly if there has been investment which alters the size of the business, is contained in the third example—namely:
a substantial change in the ratio between the value of net fixed assets … and the value of sales … to achieve substantial savings in labour costs per unit of output;
Again, I would submit that this concerns the takeover of the inefficient company. If one or all of those conditions are met by the circumstances that I have described the commission may permit some departure from the reference level.
I can only ask the Minister to look favourably on this point in general, and particularly in respect of the case about which we are corresponding.

11.19 p.m.

Mr. John Farr: I express my support for what the right hon. Lady said about the necessity to retain some form of price control. I think that the American experience is a lesson that we must bear in mind for the future. I am glad that she has noted it.
I have a couple of points to make which relate to matters upon which the right hon. Lady did not touch in what was otherwise a full explanatory introduction of the new code. Inadvertently she did not refer to a number of changes which have taken place from Article 7 onwards relating to the application of food, farm and forestry products. I notice that compared with the 1973 order Article 7 leaves out the control of sugar. Article 8 (2) reads:
The price for the sale of raw beet sugar for further refining is not controlled.
That I accept, but I wonder, why the Government have left out any form of


control on sugar prices since this was included in the original article in the 1973 order which has now expired.
The other point which I wish to raise in relation to this part of the order dealing with food, farming and forestry products relates to Article 10 which appears to place a good deal of responsibility on the Milk Marketing Board. I wonder whether the right hon. Lady can tell me whether the board has not only been consulted but has expressed its agreement to what appears to be a rather complicated mechanism.
The right hon. Lady referred to that part of the code which deals with the nationalised industries, from Article 97 onwards. This article contains a list of nationalised concerns. Can the right hon. Lady tell me where the BBC fits into this? It is not in the list of nationalised concerns and it is not included in Article 6 which deals with application and says:
The following are not controlled:
I assume that the BBC is subject to control. If it is, can the right hon. Lady say how this document will prevent the increase in the colour television licence by 50 per cent. from £12 to £18?

11.22 p.m.

Mr. Giles Shaw: In any debate on the Price Code hon. Members are torn between the need to obtain clarification on matters of detail, because these are matters of detail with which industry has to live from day to day, and the equally important need to debate the premises on which the code mechanism is based. As the right hon. Lady has emphasised, it is a vitally important tool in the Government's economic policy to fight inflation. Tonight's debate is no exception.
Hon. Members have raised a number of specific points of detail, such as that raised by my hon. Friend the Member for Bosworth (Mr. Butler) about mergers and take overs. There has also been the need to examine some of the premises, of efficiency and competition, to which my hon. Friend the Member for Hove (Mr. Sainsbury) referred.
The draft code was debated as recently as 2nd December and the code became operative from 20th December, albeit embodying too few amendments in our view, but nevertheless amendments which

we welcomed. The code is in action and there is little more we can easily do about it. The more profitable course is to concentrate on the principles embodied in it and to judge their effects and effectiveness in the present economic climate.
It may come as a shock to hon. Members to be reminded that in the introduction to the Consultative Document there is written, in paragraph 7 on page 2:
At the same time, the Government recognise that greater efficiency in the use of resources, higher exports and job opportunities, all depend on industry's capacity and willingness to invest and innovate, and in the competitive vigour with which it responds to market opportunities. The Price Code must be adapted to meet these requirements.
These splendid sentiments flowed no doubt more easily from a capitalist quill than from a bureaucratic ball point. That rapture, frankly, has been rather short-lived. I quote from the general principles published in the existing code in Article 3:
The general principles relating to prices are:

(i) to limit the extent to which prices may be increased on account of increased costs, and to secure reductions as a result of reduced costs;
(ii) to reinforce the control of prices by a control on profit margins while safeguarding investment;
(iii) to reinforce the effects of competition, and to secure its full benefits in the general level of prices."

So much for the results of the wide-ranging consultations, or was it perhaps that the poet in the Department had left—Ichabod, Ichabod, perhaps the Tory had departed.
It is relevant to point out that the Government see the code as essentially restrictive—restrictive of profits and restrictive of prices. Yet, at the same time, the Government claim that they are expansionist in terms of their desire to encourage competition. My contention is that this is a flaw, because it is a fundamental divergence of objective. I do not see how the code can remotely affect competition. My hon. Friend the Member for Hove made that plain in demonstrating that the competition of price in the market place was the surest way of ensuring consumer benefit and proper pricing. It establishes rules which all who compete in any individual market must observe.
The productivity deduction penalises the efficient, whose room to reduce cost particularly after a series of threshold payments is marginal, whereas it favours the less efficient who can more easily absorb non-allowable costs. Prices today in consequence are being determined less and less by competition and more by the maximum price permissible under the code.
I fully recognise that the pressures of competition brought about by inflation are increasing day by day. That corresponds with what my hon. Friend the Member for Aylesbury (Mr. Raison) pointed out, that the rôle of the code should be gradually reduced and the rôle of true competition should gradually take over. I doubt whether the objective of reinforcing competition can be held to be met by the practice of this code.
I was interested in what the right hon. Lady said about investment. We welcome the inclusion of the new provisions in the Price Code, and the fact that it might be possible—although the right hon. Lady would not wish to be committed to this—to look at pricing and investment intention in tandem so that one might allow increased flexibility to the other. That I welcome as an important possible change for the future.
Hon. Members may think that since we last debated the Price Code in early December the climate of investment has changed, and the right hon. Lady suggested that that was so. True, there has been a welcome if somewhat belated recovery in the stock market which has brought the prospect of raising capital from that source a little nearer. Welcome, too, is the modest reduction in interest rates, which will certainly benefit industrial cash flow. But let us be clear. There has been no significant improvement in the long-term outlook, which influences the way in which investment decisions are made.
This morning The Times refers to a recent Government survey of industry's investment intentions. It suggests that there is a projected fall of 10 per cent. in the capital spending programmes for this year compared with a year ago, and forecasts a further fall in 1976. No wonder the Director General of the National Economic Development Council is on record as having claimed that there must

be additional incentives to encourage investment, although I do not share the right hon. Lady's optimism that the climate of investment provided by the code is such that it will be readily taken tip because funds will be readily available. The 17½ per cent. investment allowance will clearly not be enough, and it may well be a case of too little, too late.
There is neither the cash nor the confidence to enable the investment provisions to work effectively. Conditions for investment will return only when the Government acknowledge that increased and retained profits are the only—and the only effective—spur to sound investment.
With the code's determination to control profit margins, and with the Government's determination to continue to talk about controls or interventions of one kind or another, whether by nationalisation or through the National Enterprise Board, it is no wonder that industrialists and investors lack confidence to take the decision now which have such an important bearing on the future. Only a change of Government can restore confidence on that issue.
These investment allowances will not be taken up, and the question arises—it is an important one—whether industry will benefit from the £800 million which the Chancellor of the Exchequer has released for re-investment in industry by the provisions of the code. Taking the code as a whole, what evidence have we that industry and industrial liquidity will benefit by that amount? Discussing this point in December, the Under-Secretary of State said:
A better comparison would start not from the present Price Code but from the state of company profits as they stand today.
It is on this basis that my right hon. Friend the Chancellor of the Exchequer has judged that it will be necessary to restore £800 million to company profits through changes in the Price Code. The various changes we propose are calculated to produce this result."—[Official Report, 2nd December 1974; Vol. 882, c. 1195.1
This suggests to me that calculations have clearly been done.
Is the hon. Gentleman able to supply a breakdown as to how this £800 million has been arrived at as between the various relaxations embodied in the code? Can he break it down as between reduction in productivity deduction, investment


allowances and the widening of the definition of allowable costs, and so on? It may take a little time to answer, and it may be necessary for Caithness to speak to Sutherland. We are entitled to know how this much-needed and much-vaunted improvement in industrial investment is to be achieved.
We welcome the further changes in the code which increase its flexibility. I welcome, on behalf of the wool textile industry, so important to some of my constituents, the exclusion of wool tops from control and the retention of the enterprise as well as product or range of products as a cost centre. But I am informed that, under Article 39, the profit margin safeguard proposed for a product at 30 per cent. does not equate precisely with the safeguard offered under the gross margin level for the enterprise as a whole, and if it is to be offered as a direct alternative figure, it should perhaps be 25 per cent. and not 30 per cent.
I echo the point raised by my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) concerning the disappointment that the motor industry must feel that commercial vehicles have not been included within the investment allowances. Whilst we respect the right hon. Lady's assurance that this might be re-examined, I hope that it will be done quickly. The motor industry would wish to see it done. It will have an important effect on industries, such as the food industry, which have large vehicle fleets delivering quantities of perishable commodities with great frequency.
I declare my interest in a company in the food industry and refer to the question raised by my hon. Friend the Member for Harborough (Mr. Farr) about sugar. I thought it was a fair point. I cannot help mentioning that many firms in the manufacturing section of the food industry which use sugar want to know what they have to demonstrate to the right hon. Lady in terms of cash flow or profit which would lead them to obtain the same concessions as the apparently impoverished sugar refiners are able to obtain.
Taking the Price Code as a whole, and setting it in its current inflationary context, these provisions are still intensely restricting on British industry's capacity

to fight its way through the difficulties with which it is beset.
While the code's effect on the retail price index may be only short-lived and overtaken by events, its longer-term effects on the time, energy, involvement and sheer powers of management are deeply damaging. Withtout an effective pay code, the Price Code is still something of a dagger in industry's back. By relaxing some of the provisions in the code, the Government has pulled the dagger partially out, but I fear the patient is still bleeding to death.

11.35 p.m.

The Under-Secretary of State for Prices and Consumer Protection (Mr. Robert Maclennan): I should like first to congratulate the hon. Member for Pudsey (Mr. Shaw) on his first appearance on the Opposition Front Bench. [HON. MEMBERS: "Hear, hear".] We have listened to him with great interest in earlier debates on this subject and we are well aware of his expertise. We are happy to see him in his present position.
I should like to begin by mentioning the speech of the hon. Member for Aylesbury (Mr. Raison). I am glad that he gave the changes an overall welcome and recognised that they constituted a useful improvement on the stage 3 code. He welcomed the investment incentive, as did a number of other hon. Members, and also the concessions made during the period of consultation following the publication of the White Paper.
The hon. Gentleman rightly speculated on the effectiveness of the code as a means of dealing with inflation at this time and drew attention to two possible lines of objection which could be made against it. On the one hand, his view was that it could screw down industry too hard, and also that as profit levels slipped it might be seen to be increasingly irrelevant. These thoughts were not far from our minds, and we sought to make the code more relevant to the problems of controlling inflation. At the same time we seek by reason of the changes, to stimulate investment.
The hon. Gentleman asked me to say say something about the possible use of the productivity deduction as a penalty for excessive wage settlements. I merely repeat what my right hon. Friend the Secretary of State has said on a number


of occasions, namely, that it would be possible to introduce the proposal only if both sides accepted it—and from the first the CBI made it plain that this was not acceptable.
The hon. Gentleman, on the subject of the consultative document, asked whether we would seek to take account of inflation accounting procedures in any further amendments we might make to the Price Code. I think that it would have been improper in the Price Code review to attempt to forestall the report of the Sandilands Committee, although we shall be considering carefully and with great interest the recommendations which the committee brings forward and doubtless, in the evolution of price control policy, we shall have to take account of the recommendations they make.
The hon. Gentleman also asked my right hon. Friend to consider putting profit checks on an annual rather than on a quarterly basis, and the hon. Member for Hove (Mr. Sainsbury) made the same point. The present position is that the Price Commission gets quarterly reports, but an excess over profit margins in a single quarter is not necessarily penalised.
The Price Commission is required to take account of "seasonal and other distorting factors" under paragraph 66 of the code. I know that there are complaints about this system, but it seems to be working reasonably well and better now than at first. If the commission had always to wait for a whole year's results, it might have to stand idly by while enormous excesses built up.
The hon. Member for Hove (Mr. Sainsbury), who spoke in terms fundamentally critical of the concept of control of inflation by the Price Code, expressed depression at the fact that we had reached stage 4, and a hope that we should not find ourselves with a stage 5. I assure the hon. Gentleman and others who have raised the same matter that the Government have no intention of embarking upon another fundamental review of the code in the immediate future. It is known that the counter-inflation legislation expires in the spring of next year. Plainly, we shall have to consider what is to take the place of the present arrangements. My right hon. Friend, in her opening remarks, gave some indication of the

way that her mind was moving in this respect. I hope that will give the hon. Gentleman and industry the reassurance that the Government do not intend to seek to chop and change provisions which are inevitably somewhat complicated and, as he and others have said, result in the expenditure of considerable effort in coming to terms with them.

Mr. Adam Butler: I hope that the Minister is not ruling out further modifications if they prove essential in the light of experience.

Mr. Maclennan: I am not ruling out changes in our approach to specific rules. We are not about to embark upon a major change of the code. If small amendments became desirable, we should have to give careful consideration to them, but certainty, so far as it is possible, is important in a document of this kind.
The hon. Member for Hove in his wide ranging attack on the whole notion of control through the Price Code, complained about 696 employees of the Price Commission devoting their time to the work of which he sought to make a certain amount of fun. The quarterly report makes plain the substantial savings in price increases which have been achieved which have been estimated at £116 million per annum.

Mr. Sainsbury: rose—

Mr. Maclennan: I do not think that I ought to give way again, because I have many points to answer and we are limited for time. I think that for such a small number of men and women this is a substantially beneficial output of work.
The hon. Member for Hove also spoke of the disincentive to investment which the Price Code constituted. The liquidity problems facing industry have given rise to the relaxations which have occurred, but British industry did not invest as the Conservative Government would have liked it to do in 1970, 1971, or 1972, when there was no price control. Investment picked up, however, in 1973, and held up well in 1974, despite price controls. Price controls have not inhibited investment in France or Belgium. Our reliefs for investment are, we think, very generous, and provide a positive incentive.
A number of hon. Members have raised the matter of the exclusion of commercial


vehicles from the investment incentive. The Government are prepared to consider evidence which industry brings forward of the case for this, but I must make it clear that we do so within the context of the take-up of the investment relief generally, as we made clear in the December debate on the consultative document. My right hon. Friend deliberately spoke of commercial vehicles, because it was to that subject that her remarks referred, and they were not intended to be construed more widely.
The hon. Member for Bosworth (Mr. Butler), in an important speech, asked me a number of questions, some of which were very detailed, and I think that I would have difficulty in answering them tonight. They related to the profit margin reference levels if there were a merger or takeover. I know that his interest is in respect of a particular firm; perhaps he will forgive me if I write to him rather than answer his questions tonight.
The hon. Member for Harborough (Mr. Fell) spoke of the removal of sugar from the Price Code. We have powers, under Section 2 of the Prices Act, to set maximum prices for sugar. Obviously we shall consider using these if it seems appropriate to do so. He also asked whether the Milk Marketing Board had been consulted on the new rules and whether it had agreed. It was consulted and it accepted that the changes went some way towards giving the additional flexibility it sought. It would have preferred milk sold for manufacture to be totally outside the controls, but accepted that that would not have been altogether realistic. As for the BBC, it is controlled by ministerial decisions about licensing.
The hon. Member for Pudsey asked the most fundamental questions—about the extent to which the revised Price Code would influence investment. He may have been exaggerating the claims for the effectiveness of what we have done. What is clear is that the investment relief from the Price Code is bound at the margin to have encouraged some investment which would not otherwise have occurred and, through the multiplier effect in the economy, the importance of such marginal changes in terms of jobs particularly is important. If the Government had not acted, companies would have had graver doubts about their cash

flow and liquidity, and the volume of investment expected this year would have fallen even more—with adverse effects on our provision for the future and on employment this year.
There is no doubt that manufacturers' investment decisions—and therefore decisions about the number of people in employment—are affected by the prospects for growth, the availability of profit to finance the investment and their view of other risks, including the risk of fast inflation. There is no doubt, therefore, that measures directed towards the control of inflation and the building of real profits, on which much investment depends, are in the interest of everybody in this country. They make useful employment now and provision for growth in the future.
In conclusion, I make only one point. I have the impression that many people in industry are far from dissatisfied with the way in which the stage 4 code has come out. We are all glad that the investment relief has been widely welcomed. I do not share the view of the hon. Member for Pudsey that it will not be taken up. There has already been a lively interest expressed in this. It now rests with industry to familiarise itself with the new provisions and make the best use of them. I understand that there are still many category I and II firms which have not given notice to the Price Commission of their intention to invoke the investment relief. There is nothing to lose and much to gain from lodging these claims at the earliest date. I hope, therefore, that some of those who have been quick to complain that the new code does not go far enough will now study the new code and see exactly how far it does go.

Mr. Giles Shaw: Will the hon. Gentleman answer the question about the £800 million? Will the investment relief really provide £800 million of improved liquidity and, if so, how does it break down?

Mr. Maclennan: That is a difficult question to answer in the minute which I believe I have left. It was not advisedly that I failed to answer that point. I am bound to say that the calculations are not easy to make. I have no doubt that they could be challenged. But our best estimate of the effect of what we have done—in particular the reduction of the productivity deduction, the investment relief and


the extra reliefs announced by my right hon. Friend following the consultative document—is that it will amount to £800 million, plus £200 million, which comes to a total of £1,000 million—although I cannot obviously stand here tonight and argue every item of how this was achieved.

Question put and agreed to.

Resolved.
That the Counter-Inflation (Price Code) Order 1974 (S.I., 1974, No. 2113), a copy of which was laid before this House on 18th December, be approved.—[Mrs. Shirley Williams.]

Resolved.
That the Counter-Inflation (Price Code) (Amendment) Order 1974 (S.I., 1974, No. 2158), a copy of which was laid before this House on 19th December, be approved.—[Mrs. Shirley Williams.]

Orders of the Day — STATUTORY INSTRUMENTS

Mr. Deputy Speaker (Mr. Oscar Murton): If there is no objection, I shall put a single Question on Motions Nos. 6, 7 and 8.

Motion made, and Question put forthwith pursuant to Standing Order No. 73A (Statutory Instruments):

INDUSTRIAL DEVELOPMENT
That the draft Ships and Mobile Offshore Installations Construction Credits (Increase of Limit) Order 1975, a draft of which was laid before this House on 18th December be approved.—[Mr. Pavitt.]

SEA FISHERIES
That the Sea Fish Industry Act 1970 (Relaxation of Time Limits) Order 1974 a copy of which was laid before this House on 19th December, be approved.—[Mr. Pavitt.]

SEA FISHERIES
That the White Fish Authority (Research and Development Grants) Order 1974, a copy of which was laid before this House on 19th December, be approved.—[Mr. Pavitt.]

Question agreed to.

ADJOURNMENT

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Pavitt.]

Orders of the Day — POSTAL RATES (OVERSEAS SERVICES)

11.53 p.m.

Mr. Christopher Price: We have had prices this afternoon. We have had prices all evening. I fear that for the last half hour of the evening we shall be having prices again.
Perhaps I should start by declaring an interest. I have no proprietorial interest in any publication, but from time to time I turn an honest penny by writing articles in various publications, and the New Statesman in particular.
First, although the form in which I have put down the debate is limited, this should not be taken to mean in any way that I am satisfied with other unsatisfactory aspects of this situation, particularly the home postal rates and the rates for matter that goes through the post other than books and periodicals. It is simply that I felt very strongly about the overseas rate and its effect on our export trade, particularly in periodicals and books, which will be most seriously affected by the increases in charges. It is on that matter that we should concentrate tonight.
I also realise and recognise that the mess we are in is largely due to what I might call the "Healey instruction"—the instruction that all public enterprises and the nationalised industries should, in one way or another, pay their way. Time was when Labour Members talked about Socialism being the language of priorities. Time was when our Prime Minister drew distinctions between the sledgehammer and the surgeon's knife. I fear that what we are having now in this blanket instruction to nationalised industries to produce a return on capital, irrespective of the trade and social effects of that instruction, is a massive sledgehammer which may cause grave damage in particular areas.
I want to sound three warnings about what this prospective increase in postal charges will do and to suggest a way out of the impasse. I am pleased to see that both my hon. Friend the Under-Secretary of State for Trade and my hon. Friend the Under-Secretary of State for Industry are here. When I receive letters from the two Departments I see that they do not yet have their own


notepaper. If the letter is from the Department of Trade the reference in the heading to Industry is crossed out, and vice versa. I am glad that both my hon. Friends are here, because they are equally affected by this subject.
I wish to make three points. First, the periodical and book industry is an absolutely vital part of Britain's export trade. Secondly, the survival of many of these periodicals is crucial to the Labour Party's policy and we have made a great deal of fuss about that in the past. Thirdly, there are real dangers of redundancy and a reduced use of the postal service with the increase in charges that is proposed.
In 1974 the book industry earned £175 million for Britain—1½ per cent. of our total foreign currency earnings. It is fighting in the export trade with one hand tied behind its back, and the situation is getting worse. The cost of sending books and periodicals overseas through the post is calculated at 8 per cent. of invoice value. The new cost in the United Kingdom as a result of the proposed charges will be 14 per cent. of invoice value. If the charges announced to start in January 1976 go ahead, that will rise to 30 per cent. It will make this very keen export trade almost impossible to sustain in many respects.
This problem was drawn to my attention by a company in my constituency which moved from the City of London in order to reduce its costs. The managing director has written to me saying that
Our journals are in the main concerned with engineering and allied subjects, paid for by annual subscription in advance. It is not possible therefore to pass the increases on retrospectively.
he wrote
This increase is of such a serious magnitude as to cause my Board of Directors to give serious and immediate consideration to the termination of a number of titles.
I am sure that the magazine on aircraft engineering is a unique publication. If it goes out of publication in Britain it may be taken over by the Americans, but it may be taken over by nobody, and this quite unique service will be lost to the industry. Therefore, from the export point of view, this is a crucial issue.
I come to a group of periodicals of which the New Statesman is one. The

increase in overseas postal charges has been announced as 54 per cent. It was to have been 100 per cent., but it has been reduced. However, the 54 per cent. covers a multitude of percentages for different weights. Those periodicals with the least advertising—that is, the lightest periodicals—in the 2 oz to 7 oz weight band, are hit hardest, with a 71 per cent. increase. That means that those least able to defend themselves are hit hardest.
It is the Labour Party policy to try to maintain minority publications. In this week's New Statesman there is an article by the editor saying:
Indeed Mr. Benn himself, who as Secretary of State for Industry sanctioned the latest round of postal increases, not so long ago put his name to a document that roundly condemned the present trade distribution arrangements for restricted circulation publications, as amounting to 'a form of censorship'. Maybe so—but hardly as effective 'a form of censorship' as the proposed rise in the postal tariff is likely to be for a whole host of small publications desperately trying to keep the minorities' flag flying in what has become an 'admass' market. In the case of the New Statesman, almost a quarter of whose copies go out each week by post, our new post office bill (even after the trifling temporary concession on the overseas surface rate) is likely to add nearly £20,000 a year to our costs.
It may seem to be special pleading, but it is special pleading that I am entitled to make. In fact, such figures apply to a whole host of other publications, trade and technical, as well as political.
My third point concerns redundancy. If many of these publications cease, it will add to the redundancies that we are liable to have over the next few months. Both SOGAT and ASTMS have made strong protests about the matter, and many publishers are considering means other than the Post Office to distribute magazines. In the long run this can do the Post Office no good.
For the rest of the time available to me I should like to be constructive. I think that there is a way out of the apparent impasse. After representations were received the Post Office made the reduction from 100 per cent. to an average of 54 per cent. for the calendar year 1975. That was through no tenderness towards the periodicals, but because it was pointed out that the prospective increases wildly over-stretched the UPU guidelines for overseas rates.
There is a difficulty here, but there is a way out. The Post Office is in a serious difficulty because of the new imbalance charges placed on it as a result of the Lausanne Convention. Instead of having to pay £2·8 million in imbalance charges, it faces a bill of £10·7 million. The Post Office must find almost £8 million extra. We must become used to this, because it is a Third World revolt, similar to the oil price situation. The countries which handle lots of incoming mail and very little outgoing mail will make it clear during the coming years that they want compensation for this disparity. The UPU regulations specifically allow compensation for that. That is why I am so pleased to see a representative of the Department of Trade on the Front Bench.
It will be right for the Department of Trade, in considering its responsibility for export promotion, to make some contribution—not a subsidy in the proper sense of the word—to the Post Office to cover the very wide imbalance charges. Britain will be faced with a heavier burden of imbalance charges than any other country. We are in the awkward position of being a small country which accepts a much narrower rôle in the world, but of having responsibility for a world-wide language. It is a responsibility that we must face squarely and take openly.
It would be a terrible tragedy if a blind obsession with the Chancellor's rules about public sector accounting were to produce a situation in which our English language publications were to be lost, one after another—some to the Americans and some to other countries, which are increasingly publishing and pirating English language publications. I hope that I have made out a case that this is a special export problem, connected with our world rôle as the mother country of the English language.
I hope that both my hon. Friends on the Front Bench, having listened to this case carefully, will take the problem seriously and propose some sort of subsidy, so that at the very least the 1976 increases, which will otherwise be severe—the present increases are crippling enough—will be held down substantially.

12.8 a.m.

Mr. John Stanley: The Opposition welcome very much the choice by the hon. Member for Lewisham, West (Mr. Price) of this important subject for an Adjournment debate.
I suggest that the central problem is the direct conflict of interest between the limited financial and commercial requirements of the Post Office and the wider but equally important national requirements of exports. Where that choice is posed, the paramount consideration is the need to maintain and to expand our existing export trade in books and periodicals.
I join the hon. Gentleman in welcoming the presence of the Under-Secretary of State for Trade.
I stress the importance of this part of our overall export trade, which was worth £175 millions in 1974 and which is likely to reach about £200 millions in the current year. We should not ignore the intangible benefits arising from this trade, which is a prime means of advertising British goods and technology in exported periodicals and books. It is also a crucial vehicle for the dissemination of British culture. Whatever intangible benefit that may be, we hope that it is beneficial both to this country and worldwide.
It is an export trade in which we cannot regard ourselves as having a permanent and captive market. It is intensively competitive, and it is a market in which we shall have to compete very hard on price if we are to maintain our existing share of it. The damaging effect of these charges on British exports is vastly greater in its significance than the limited financial value of the increased charges to the Post Office itself.
I hope that the Minister will give serious consideration to the important suggestion made by the hon. Gentleman that means may be found whereby the Department of Trade can assume some responsibility for the imbalance charges which have fallen on the Post Office so as to permit a substantial reduction in the 54 per cent. increase in the overseas surface rates.

12.11 a.m.

The Under-Secretary of State for Industry (Mr. Gregor Mackenzie): I listened with considerable interest to the speech of my hon. Friend the Member for Lewisham, West (Mr. Price) and also to that of the hon. Member for Tonbridge and Malling (Mr. Stanley), whom I am pleased to see occupying the Opposition Front Bench for this debate. I may see him there on many future occasions when we discuss postal matters. I hope that he enjoys a long stay shadowing me.
I am grateful to both the hon. Gentlemen and my hon. Friend for their constructive contributions to this very important debate on overseas postal price increases. I am also indebted to my hon. Friend the Under-Secretary of State for Trade, who has been sitting next to me listening to both speeches with great interest. I am sure that he has been as impressed as I have by the arguments which have been advanced.
In the short time available to me, I shall try to deal with some of the matters which have been raised.
The first point which I should like to make clear is that although the Government are naturally consulted on pricing policy, postage rates for specific services are essentially a matter for the Post Office and its users' council. This fact is enshrined in the 1969 Post Office Act, which my hon. Friend and I supported vigorously in 1968, and which imposed on the Post Office a duty to provide postal services whilst having regard to "efficiency and economy" and gave the Post Office the power to make schemes setting out the charges and conditions applicable to its services. In recent years this freedom has of course been restricted by the requirements of counter-inflationary policy and the terms of successive price codes, with the result that this year the Post Office as a whole faces losses of about £300 million, which is likely to rise to an estimated £700 million in 1975–76.
Facing these massive forecast deficits, the Post Office had no choice but to seek substantial price increases. Even so, at the urging of my right hon. Friend the Secretary of State it has sought lower increases than the maxima which could have been claimed under the stage 4 Price Code and will accordingly still be left with an estimated loss of about £50

million next year. All these proposals have been referred, as required by statute, to the Post Office Users' National Council, and all except the overseas rates have also to be approved by the Price Commission. Neither of these bodies has yet reported on its consideration of the Post Office proposals, so that no final decisions have yet been made. But I shall not conceal from the House the Government's belief that there is a compelling case for their acceptance and introduction.
My hon. Friend the Member for Lewisham, West takes issue with the Government on the whole question of the price rises in nationalised industries, as set out in the two speeches of the Chancellor of the Exchequer, but my right hon. Friend acknowledged that he knew it would be a painful and disagreeable business to carry this policy through, even by stages. However, we believe that a return to economic pricing is as essential to the efficiency of the public sector as it is to the private sector and to the effective control of public expenditure.
As the Minister responsible, I get rather tired of one day being told that nationalised industries are inefficient and do not make a profit, and then, when they seek to operate in a commercial way, and at least wash their faces, as we say in my part of the country, hearing criticism of them.
I have dealt with the background, my rôle, and the Government's attitude. In the overseas postal services, with which we are particularly concerned tonight, the Post Office forecasts a deficit in the current year of £4½5 million, assuming no price changes. Because of rising sea conveyance costs and the steep increases in imbalance payments decided at the 1974 Congress of the Universal Postal Union, the Post Office expects this deficit to amount to £24½5 million next year. That decision of the UPU, which increased and extended the compensation arrangements first introduced by the 1969 Tokyo Congress, was strongly resisted by the British delegation, but its views were overborne by the majority and the Post Office must consequently abide by the terms of the new convention.
That is why the Post Office originally proposed, for introduction in March this


year, very substantial increases in the overseas printed paper services, which operate at a heavy and increasing loss. The House will know, however, that, following the detailed and persuasive representations made by the publishers, booksellers and hon. Members, including my learned Friend and the hon. Member for Tonbridge and Malling (Mr. Stanley) to the users' council, the Post Office has recently modified its proposals to meet their wishes. As a result, I understand that for the rest of 1975 the proposed increases would be cut by half: in weighted average terms the overseas printed paper full rate would rise by 24 per cent. instead of 66 per cent; the printed paper reduced rate would go up by 54 per cent. instead of 100 per cent., and the rate for direct agents' bags by 50 per cent. instead of 100 per cent. It is, of course, true that the original increases are still proposed for introduction in January next year, but I am sure that hon. Members will readily acknowledge the value of the concession which the Post Office has proposed in putting forward these revised measures, which will cost it about £3 million in revenue forgone and still leave the reduced rate service to operate at a loss even after the second stage increase in January next year.

Mr. Christopher Price: My hon. Friend indicated that these measures have been taken to meet some people's wishes. I put it on record that I have found no publishers in this field whose wishes are met by this reduction and I feel that this will still represent crippling increases.

Mr. Mackenzie: That is as may be, but my hon. Friend must recognise that it is a concession made by the Post Office. Having read the magazines concerned, I thought there was at least a qualified enthusiasm for the new proposals which the Post Office have made.
My hon. Friend suggested that one way out of the problems with which we are faced should be some form of subsidy. Having already explained the Government's decision to phase out subsidies to nationalised industries, I am afraid that it would simply not be realistic to accept my hon. Friend's suggestion. I cannot believe that it

would be right to put the Government's decision into effect with one hand and to circumvent it by seeking to introduce subsidies with the other.
The hard fact is that any such subsidy has to be paid for. It could only be introduced at the expense of other users of the postal services or of the taxpayer, and I must make it clear that the Government see no justification for either course.
I give my hon. Friend a firm assurance on one matter which I know has been troubling some members of the publishing industry. The Post Office has no plans to abolish the special rates which have long applied to books, periodicals and newspapers sent overseas by post.
My hon. Friend said he was concerned about the effect on jobs, exports, and so on. I fully understand the concern which has been expressed on behalf of the publishing industry about rising costs, the effect of postal increases on jobs in the industry, and the possible effect on exports. I know that publishers make and want to maintain a most valuable contribution to exports. The export performance of any industry is influenced by many different factors, and it is not easy to single out any particular change and pinpoint its effect. I hope that the effects will not be as serious as the industry fears, and I am sure that publishers will assess how best to mitigate them and maintain their export trade, even to the extent of considering alternative means of distribution.
My hon. Friend also raised the question of comparisons with other countries. I cannot speak for my counterparts in other countries. I am not responsible for the tariff policies pursued in the United States postal service, or in other administrations, though I expect that all member countries of the UPU will in due course be reviewing their postage rates to take account of the decisions of the 1974 congress, and that those who find themselves in a similar position to the British Post Office will be led to seek a similar remedy.
I have tried to cover some of the points that have been raised tonight. I appreciate the concern that has been expressed by both hon. Members, and I hope that what I have said has helped to clarify the situation. I hope, too, that the new


proposals put forward by the Post Office will be regarded as a reasonable concession, bearing in mind the considerable deficit that it has to bear.

Question put and agreed to.

Adjourned accordingly at twenty-three minutes past Twelve o'clock.